Markit, a leading global diversified provider of financial information services, today announced the development of a new comprehensive service for electronic trade confirmation and exercise management for the FX options market. The service will be deployed by MarkitSERV, Markit’s trade processing service for the OTC derivatives industry.

Barclays, Citi, HSBC, J.P. Morgan, Morgan Stanley, Nomura, RBS, UBS and major buyside institutions, including Citadel’s Global Fixed Income Fund, are working with Markit to design the new service that will provide electronic legal trade confirmation and an electronic system to manage the exercise processes for FX options. This post trade solution will help participants reduce operational risk and become more efficient in their management of FX options trades.

The new service will improve front and back office processes such as:

• centralised generation of legal trade confirmations
• straight-through-processing (STP) of exercise actions
• realtime communication of exercise actions via an audited platform
• management of other lifecycle events based on a confirmed matched trade population.

Central confirmation of FX trades makes it more efficient for the FX market to comply with regulatory requirements, such as pairing unique trade identifiers for regulatory reporting, and provides a foundation for compliance with future FX regulation, such as requirements for clearing.

James Bindler, global head of G10 Foreign Exchange at Citi, said: “Manually exercising FX options is a vestige from an earlier era of FX options trading. Automation of this process will help to reduce both uncertainty and risk in a market where volumes have grown substantially over the past years.”

Future development

Markit intends to expand the service to provide legal confirmation for non deliverable forwards (NDFs). Doing so will complement its existing MarkitSERV clearing middleware service for NDFs.