State Street Launches SwapEx Initiative, Significantly Expanding End-to-End Derivatives Solution
February 15 2012 - 8:00AM
Business Wire
State Street Corporation (NYSE: STT), one of the world’s leading
providers of financial services to institutional investors, today
announced the expansion of its end-to-end derivatives solution to
include an execution platform for the trading of derivatives
products. The launch of this swap execution facility (SEF), SwapEx,
coincides with the 2012 implementation of significant regulatory
changes in the United States and Europe. State Street’s
comprehensive derivatives solution already includes clearing,
servicing, custody and accounting, collateral management,
valuation, and risk and analytics.
As the Dodd-Frank Act and similar measures under European Market
Infrastructure Regulation (EMIR) and Markets in Financial
Instruments Directive (MiFID) are adopted, the large majority of
swap contracts currently traded over the counter (OTC) directly
between two parties will migrate to multi-party electronic trading
platforms, creating greater price transparency and increased
liquidity as more participants enter the market. SwapEx provides
the first step in a global end-to-end solution that reduces
operational risk through the automation of the many stages of
derivatives processing, including execution, clearing, collateral
management, cash and securities flows between the middle and back
offices, transaction cost and risk reporting, valuations, and the
reconciliation of positions. State Street plans to file its SwapEx
registration with the United States Commission Futures Trading
Commission (CFTC) when the application window opens later this
year. In preparation for the launch, State Street has entered into
an agreement with National Futures Association (NFA) to perform
regulatory services for State Street’s SEF.
“The derivatives market is in the midst of significant change as
it moves away from a bilateral trading model to a centrally traded
and cleared environment that offers greater price transparency,
liquidity and enhanced risk management,” said Clifford Lewis,
executive vice president and head of the eExchange business at
State Street. “State Street’s core competencies as a custodian
combined with the advanced technology of our eExchange platforms,
including SwapEx, make the expansion of our derivatives solution to
include a swap execution facility a natural extension of our
business.
“Through State Street’s comprehensive derivatives solution,
buy-side clients will have a centralized means for trading,
clearing and processing their swap positions, managing the related
collateral demands, allocating, reconciling and accounting for
their positions, automating manual processes, and helping to reduce
operational risk,” said Jeff Conway, executive vice president and
head of Investment Manager Services at State Street. “This
initiative is a strategic priority for State Street and emphasizes
our commitment to providing solutions for our clients’ changing
needs in an evolving marketplace.”
Key functionality of the SwapEx platform will include:
- Advanced technology and processing
speed leveraging the Currenex, FX Connect and GovEx execution
platforms
- Automated post-trade capabilities,
leveraging State Street’s existing infrastructure
- Multiple execution styles to
accommodate each client’s preferred method of execution: a central
limit-order book, request-for-quote, both fully disclosed and
anonymous, indications of interest and auction capabilities
- Portfolio compression available through
request-for-quote and indication of interest execution styles that
allow for the ‘tear up’ of positions
- Multi-asset class capabilities,
including swaps, treasuries and futures utilizing State Street’s
platforms as well as third-party platforms such as Eris
Exchange
State Street added to its end-to-end derivatives solution in
2011, expanding its futures commission merchant services to cover
swap clearing capabilities, as these products will move into a
centrally cleared environment through established Central Clearing
Counterparties (CCPs). Parties to these trades will be required to
work through a clearing broker 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.
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. 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, hedge funds,
private equity and real estate.
About State Street Corporation
State Street Corporation (NYSE: STT) is one of the world's
leading providers of financial services to institutional investors
including investment servicing, investment management and
investment research and trading. With $21.8 trillion in assets
under custody and administration and $1.9 trillion* in assets under
management at December 31, 2011, State Street operates in 29
countries and more than 100 geographic markets. For more
information, visit State Street’s web site at
www.statestreet.com.
*This AUM includes the assets of the SPDR Gold Trust (approx.
$63 billion as of December 31, 2011), for which State Street Global
Markets, LLC, an affiliate of State Street Global Advisors serves
as the marketing agent.
This document is not intended to suggest or recommend any
investment or investment strategy and does not constitute
investment research. Products and services outlined in this
document are offered to professional investors through State Street
Global Markets, LLC, which is a member of the National Futures
Association, FINRA, SIPC and the New York Stock Exchange, and are
intended for institutional clients in the US or other
jurisdictions. This information is not intended for and must not be
used by Retail or other similar private investors. Futures trading
is speculative and involves risk of substantial loss. The valuation
of futures and options may fluctuate and as a result clients may
lose more than the amount originally invested and may have to pay
more later. Additionally, trading futures in foreign markets
carries particular risks due to fluctuations in the currency
exchange rate and differences in regulatory protection. Investments
in futures may not be suitable for all investors.
State Street Global Markets, LLC is a wholly owned subsidiary of
State Street Corporation. The references in this document to State
Street or State Street Corporation may include State Street
Corporation and any of its affiliates. The products and services
may not be available in all jurisdictions.
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