CQS streamlines OTC processing with Markit deal

LONDON – CQS, the London-based asset manager that manages a number of absolute return and directional hedge funds with $5 billion under management, is live on Markit's trade processing service, formerly know as Communicator Inc, which Markit acquired in May this year.

The service – which according to Leo Schlinkert, Markit's executive vice-president and head of trade processing and distribution, spans all asset classes and instruments, and supports novations, terminations and dispute resolution – is designed to allow organisations to affirm their OTC trades, and to confirm them by using links to utilities including the The Depository Trust & Clearing Corporation.

According to Jason Parker, head of CQS's middle office, the contract has allowed his organisation to streamline, and therefore reduce, a lot of the paper-based administrative tasks traditionally associated with processing OTC derivatives trades. "There is a lot of paper flow moving backwards and forwards, and typically the work flow would involve someone at the counterparty drafting a document to confirm the trade, which would be sent via email or fax to us, and which we would print out and distribute to the middle office, legal department, and trader for checking, before it was signed off by the authorised signatory," Parker says. "Then we would scan it and repeat the email train, sending it back to all concerned."

Clearly that process was laborious, inefficient and prone to a number of operational risks. Markit's trade processing service transfers all the data pertaining to a typical OTC trade to soft copy, which is stored in what used to be known as Compliance Hub before the Markit acquisition, and which allows both counterparties to view the status of the trade's processing via a simple graphical user interface.

"In a nutshell it enables us to manage the workflow externally as well as internally," Parker adds.