Traina automates post trade management of equity swaps market, increasing efficiency for counterparties

News Team, 05/07/2019

CME’s Triana has brought out a service which automates the post-trade lifecycle management of the burgeoning equity swaps market, allowing fund managers to review equity swaps in one place.

Equity swaps, similar up to a point to interest rate swaps, allow two parties to exchange future cash flows to diversify its income stream for an agreed set of time while holding its original asset. Typically one party will may wish to swap the cash flow from an equity index such as the S&P 500 with the fixed rate of LIBOR for instance. Parties engaged in such transactions tend to be the larger investment banks and asset managers.

The use of equity swaps allow such institutions to hedge positions in their portfolios and should not be confused with debt/equity swap in which, as the name suggests the debts of a company can be exchanged for equity.

Automating the process should be beneficial for the buyside such as asset managers as it will streamline data reporting during the reconciliation phase. Traiana said its Equity Swaps Lifecycle Management service will transform the market’s previously manual, labor intensive and inefficient post trade affirmation processes for clients globally.

The system should also benefit the buyside counterparty by allowing them to view all the exceptions in one place meaning disputes can then be resolved between counterparties on a daily basis using the exception manager tool, rather than after monthly resets are struck. The system allows parties to view any changes in the underlying swap’s attributes daily such as daily valuations, payments and legal confirmations.

Joanna Davies, Global Head of Traiana, said: “Until now, it has been extremely challenging for buyside firms to sift through multiple swap provider reporting statements in various formats, across thousands of trades and positions per day to look for potential issues and work out exactly what has changed at the month-end reset.”

Essentially what was once a labour intensive process with lots of risk should be streamlined and given greater efficiency by the new system.

CME, or the Chicago Mercantile Exchange, is one of the world’s largest derivatives market places, enabling clients to trade futures, options, cash and OTC markets, optimise portfolios, and analyse data.

Phase one of Equity Swaps Lifecycle Management is now live with further phases set to be released this year and the next.

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