OTC client clearing API

OTC Client Clearing API

International regulation and the growing popularity of using electronic trading venues to execute swap trades has seen the introduction of initiatives that are central to the reduction of counterparty risk. These initiatives are:

• The automation of the clearing take-up process by the CCP via API messaging technology; and
• The requirement for pre-clearing client limit checks on a per trade basis

Therefore, as part of ensuring ASX delivers an OTC service that is aligned with international best practice, ASX OTC Clearing is expanding the platform functionality to include an OTC Client Clearing API. The OTC Clearing API aligns ASX with globally standardised clearing workflows that automate eligibility and client limit checks required before clearing and ensures continued adherence to strict regulatory requirements both locally and abroad.

Design Approach

The OTC Client Clearing API will deliver:

• Functionality to support clearing workflows for both voice and platform executed IRS trades
• Support for client credit limit checks via either the client’s Clearing Participant or a central limit hub
• Use of market standard FpML messaging

OTC Clearing workflows

ASX’s API development focuses on changes to OTC client clearing workflows where MarkitWire is the primary source of trade registration. Messaging workflows will enable Clearing Participant credit-checks and take-up via the following mechanisms:

1. Automated pre-trade credit check: Enabling executing brokers, Swap Execution Facilities (SEFs) and other approved platforms to utilised MarkitWire to submit Client Clearing trades to ASX with a pre-trade credit token
2. Request for Consent (RFC): Following submission of trades to ASX without an automated credit token, a standardised RFC message will be delivered in FpML format to Clearing Participants, or appropriate third party limit hubs, to approve/take-up new OTC trades on behalf of their clients.