Brown Brothers Harriman Launches Central Settlement of Credit Default Swap payments for Clients

Jun 2, 2009

BBH achieves significant milestone in OTC derivative industry automation efforts

Brown Brothers Harriman (BBH) announced today that it is now live with central settlement of credit default swap payments for clients. Central settlement is designed to reduce settlement risk for asset managers by replacing manually processed bilateral payments with automated netted cash flows per account, per currency.

Financial regulators in the US and Europe have actively encouraged the financial services industry to increase the level of automation for the processing of credit derivatives in order to reduce systemic risk, specifically targeting manual payment processing, reconciliation and counterparty risk management. The Depository Trust & Clearing Corporation (DTCC) and CLS Bank International launched a central settlement service for OTC credit derivative transactions. The service went live with major dealers in November 2007 and several buy-side institutions had targeted implementation by the end of May 2009. This milestone signifies one of the first buy-side implementations of the central settlement solution.

“BBH is excited to support this initiative to help our clients better manage their counterparty risk,” said Cherie Graham, senior vice president and Head of BBH’s Derivative Product Group. She adds, “BBH has been actively partnering with many of the most sophisticated asset managers to solve operational challenges associated with increased investment in complex OTC derivatives.”

BBH has been a leader in OTC Derivative automation efforts and actively involved in industry working groups. In anticipation of this milestone, BBH recently hosted a webinar (Central Settlement of OTC Credit Derivative Payments Through DerivSERV) to provide clients with information on the central settlement process, its impact to financial institutions, and participation requirements. BBH was also one of the first in the industry to receive Financial products Mark-up Language (FpML) messages over SWIFTNet in July 2007, and has since implemented STP solutions for several clients. BBH accepts FpML formatted messages for Credit Default Swap and Interest Rate Swap trade instructions via SWIFTNet or secure FTP connection.

BBH offers a flexible, integrated, technology-driven platform for derivatives processing and administration that is designed to allow the firm and its clients to adapt to market changes.

 

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