New Offering Provides Clients with End-to-End Servicing Solution for Derivatives Launches Vision Report on the Next Generation of Derivatives
State Street Corporation (NYSE: STT), one of the world’s leading providers of financial services to institutional investors, today announced the expansion of its futures commission merchant (FCM) activities to include the launch of its swaps clearing platform, enhancing its comprehensive, end-to-end derivatives solution that includes servicing, custody and accounting, collateral management, valuation, and risk and analytics.
As the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) is implemented, the majority of swap contracts currently traded Over the Counter (OTC) directly between two parties will migrate to a centrally cleared environment through established Central Clearing Counterparties (CCPs). Parties to these trades will be required to work through an FCM that acts as intermediary between its clients and the CCP. The new regulations will also impose collateral requirements and real time reporting requirements designed to reduce counterparty credit risk and bolster market transparency.
“As the derivatives markets evolve, we are increasingly aware of the need for full-service clearing and other services to help clients realize the benefits of the new derivatives regime, through enhanced transparency, more open execution platforms and central clearing,” said Clifford Lewis, executive vice president and head of State Street’s eExchange business. “State Street is in a unique position to leverage our award-winning technology platform and strong client service to benefit our clients in an un-conflicted way.”
State Street’s clearing capabilities are integrated with its existing servicing offering, forming a global end-to-end solution that reduces operational risk through automation of the many stages of derivatives processing including cash and securities flows between the middle and back offices, client reporting, valuations, and the reconciliation of positions. This solution provides clients with a single source for the reporting of both clearing and processing related activities. State Street Global Markets, the investment research and trading arm of State Street, is an FCM and currently clears futures and options on futures transactions for clients.
“State Street is committed to providing flexible, customizable solutions to help our clients navigate an increasingly complex global market,” said Jeff Conway, executive vice president and head of Investment Manager Services at State Street. “State Street’s new derivatives clearing capabilities are a key component of our derivatives offering, which now includes clearing, end-to-end OTC and exchange traded derivatives servicing, collateral management, and independent valuation, providing our clients the option of either a complete solution for derivatives or a component-based approach tailored to their specific needs.”
The derivatives clearing offering combines the expertise of eExchange, a division of State Street Global Markets, and State Street Global Services. eExchange delivers advanced trading solutions for foreign exchange, futures, US treasuries, and the subscription and redemption of money market funds and exchange traded funds and State Street Global Services provides asset owners and managers with a wide range of support, from core custody, accounting, fund administration and shareholder recordkeeping to complete investment operations outsourcing solutions and servicing for complex alternative assets like OTC derivatives, private equity and real estate.
Furthering its thought leadership within the derivatives market, State Street also launched a new Vision Report, entitled “Regulatory Reform and the Implications for Derivatives.” The report examines the current and upcoming changes in the derivatives market as a wave of new and proposed regulatory requirements begin to take hold in the United States and around the world. State Street’s Vision Series addresses key trends and developments impacting the financial services industry. Previous reports have focused on technology innovation, pensions, UCITS IV, exchange-traded funds and sovereign wealth funds. To download a copy of this Vision Focus report or others in State Street’s Vision series of in-depth reports, please visit www.statestreet.com/vision.
