Buysides Finally Getting Some OTC Derivatives Love!

The ISITC OTC Derivatives Working Group, of which I am a member, recently announced its Market Practice for Contract Notification. I've been involved with OTC Derivatives trading operations and technology for almost 20 years now, the last 10 primarily on the buyside.  When I first joined an FpML working group, allocations weren't even part of the spec, and we are only now beginning to see vendors who provide buyside OTC Derivative trading solutions.

The industry itself has lagged in recognizing the buyside's role in the OTC Derivatives market.  The first movement around helping the buyside deal with the complexity of these instruments started about 5 years ago with the Swaps Best Practices Initiative jointly sponsored by ISITC and the Asset Managers Forum within the old Bond Market Association.  The BMA is now part of SIFMA and the AMF's Swaps initiative evolved into the Derivatives Operations Committee and the formation of the ISITC OTC Derivatives Working Group.

While custodians and other service providers including DTCC, Markit and SWIFT have stepped in to assist their buyside customers to process OTC Derivative trades, there are few off-the-shelf solutions. The majority of sales of Progress’s OTC Derivatives solutions for FpML, DTCC Deriv/SERV, Markit Wire and SWIFTNet FpML still go to buysides and custodians who are adding support for buyside functionality to systems designed for sellside. I am happy to report that Progress now has software vendors as customers looking to address this market. I’m optimistic as buysides spend more to meet new regulations we’ll see more complete vendor solutions.