OSTTRA heads look to interconnectivity for growth

CME Group and IHS Markit unveiled on Wednesday the co-chief executive officers of their post-trade joint venture OSTTRA.

The firm, which blends four post trade services at the two companies, is looking to harness transparency and market structure headwinds for clients in previously opaque and bilateral over the counter (OTC) derivative markets in interest rate, foreign exchange, equity and credit.

Guy Rowcliffe, also chief commercial officer of the new entity, and John Stewart, who will add chief operating officer responsibilities to his co-CEO role, spoke to Global Investor about where they see the opportunities for the new entity.

Growing out of the OTC markets, post-trade services have tended to focus on asset class specific solutions to defined problems, but as time has moved on that in itself has created issues for clients.

“The consistent feedback we’ve had has centred on the increasingly fragmented nature of the post-trade landscape,” Stewart said. “Solutions have focused on solving specific problems in a limited sphere. What that does is create coherence and interconnectivity issues which frankly manifest themselves as operational risk for clients. What we are doing with these four businesses is leveraging that profound individual offering that doesn’t overlap and bringing that ecosystem together.”

The new entity combines CME’s optimisation businesses (Traiana, TriOptima and Reset) with IHS Markit’s MarkitSERV. Rowcliffe, who has been global head of optimisation services at CME and head of TriOptima and Reset, thinks the initial focus will be on combining pre-existing services on the new platform.

“Eventually what we will see is a benefit to client workstreams, as they will find an efficient platform on which we can collaborate to solve more problems and improve operational systems,” he said. “Obviously we are initially focusing on opportunities where existing services can quickly enhance client capability and demonstrate the value of the proposition. There are opportunities in trade matching, confirmation and reconciliation across pillars.”

One example of this would be the ability to share trade identifiers between the MarkitSERV trade confirmation, clearing and reporting service and portfolio reconciliation offered through TriOptima’s triResolve. Stewart, a veteran banker, managing director at IHS Markit and head of MarkitSERV, is a former chief data officer at UBS and sees a guiding role for the firm as it centralises its technology and sales function in the new entity.

“As we look to the longer term horizon, we will be well positioned to enable the necessary transitions for clients as OTC markets adapt to regulatory and industry headwinds,” he said.

MarkitSERV hired John Smith to fill the chief technology officer role for the new venture. He will oversee all aspects of technology across the firm, with over 20 years' experience building exchange connectivity and algorithmic trading platforms at a range of banks and across asset classes.

One challenge from all this growth will be retaining the open access to individual services from the clients that are familiar with the status quo. The brands will continue to be available independently of each other, and the new entity will not mean forced integration.

“Many elements of the business rely inherently on open architecture and connectivity and that will remain,” Rowcliffe said. “It is critical that we continue to be a demonstrably neutral actor that is available to every type of stakeholder in the market. The independent joint venture structure reinforces that position.”