The first futures commission merchant (FCM) has completed production testing for Traiana’s central risk management infrastructure for swaps clearing.
This firm is now ready to go live with clients trading interest rate derivatives and credit default swaps on swap execution facilities (SEFs) or designated contract markets (DCMs) with pre-trade order screening, as required under the new Dodd-Frank clearing regulations.
Five additional FCMs as well as further buyside firms, fund servicing firms, and order management service providers are currently in the process of joining the service and production testing.
Developed with input from leading FCMs and delivered using Traiana’s proven cross-asset CreditLink service, the service offers clearing firms and buy-side firms the ability to manage trading and clearing limits in low latency for interest rate, credit and foreign exchange (FX) swaps. Firms will be able to pre-screen orders to trade swaps prior to execution, ensuring certainty of clearing acceptance by their clearing member at the time of execution. This is one of the fundamental tenets of CFTC regulation 1.73, designed to reduce systemic risk and ensures that clearing firms are in compliance with regulations in the US and Europe.
Built on Traiana’s Harmony infrastructure, the service will be integrated to and supported by the leading SEFs and DCMs.
Designed to maximise access to liquidity and reduce limit fragmentation for buy-side firms, CreditLink supports request-for-quote and request-for-streaming trading using a centralised limit check (Ping model) and also gives clients the ability to allocate limits directly to specific trading venues to minimise latency (Push model), which is important for executing brokers, market makers and venues using central limit order books.
CreditLink also provides buy-side firms centralised management of limits across all their clearing firms, trading venues and CCPs to reduce fragmentation of limits, as well as pre-trade ‘what-if’ checking, essential for firms managing funds and trading on behalf of separate accounts/legal entities to be compliant with new swaps clearing regulations. Furthermore, the service also supports real-time post-trade limit checking of block trades and allocations presented for clearing, important for clearing firms who must quickly accept or reject trades under real-time clearing rules.
“We are very pleased that the first FCM has completed production testing, as we all continue to prepare the industry for upcoming deadlines for mandatory clearing,” says Nick Solinger, chief marketing officer, Traiana.