Morgan Stanley has been selected by BlackRock to serve as one of its primary clearing brokers for over-the-counter (OTC) derivatives transactions. Morgan Stanley acted as BlackRock’s clearing broker for its first live production transactions.
“We believe that OTC clearing can help to reduce systemic risk and serve as an important mechanism to manage and reduce counterparty exposure for our clients,” says Supurna VedBrat, Managing Director and Co-Head of Market Structure and Electronic Trading at BlackRock. “We will gradually increase volumes as we move to initiate clearing across our client base, and we have been very pleased with Morgan Stanley’s partnership throughout this process.”
Firms such as BlackRock will be required by law to clear OTC derivatives for many of their funds over the next 12-18 months, and the move to begin clearing puts the company in a better position to be compliant in advance of any mandatory deadlines required under the Dodd-Frank Act. Both BlackRock and Morgan Stanley have been working closely with industry groups and regulators to develop a market structure that takes into account the interests of all market participants.
“We believe that the adoption of OTC Clearing is an important step towards safer and sounder markets,” said Stephen O’Connor, Global Head of OTC Clearing at Morgan Stanley. “We are proud to have been chosen by BlackRock as the clearing broker for these first trades. The move to early adoption of clearing by BlackRock and others is evidence of the heightened level of interest in OTC clearing services as our clients prepare for mandatory Dodd-Frank deadlines.”
Morgan Stanley provides clearing services for both OTC and Listed Derivatives for its clients globally. The Firm currently offers OTC derivative clearing services for credit default swaps at ICE Clear Credit and CME Group in addition to interest rate swaps at LCH SwapClear and CME Group. Additional connectivity to further OTC clearing houses will be added in the future in response to client demand.