The Problem Space
Global derivatives reforms are completely changing the way products are traded, cleared and reported. Current technology platforms are unable to cope with the new ways. Traditionally futures have been traded and cleared on centralized platforms and the OTC derivatives are traded and cleared bilaterally. As the regulators want more transparency, OTC derivatives are becoming listed. I.e. we need to be able to use the same platforms for both Listed and OTC derivatives. The issues facing this are:
- Disparate solutions for Listed and OTC derivatives
- OTC platforms are geared for everything bilateral, low volume, in-house pricing and inward looking risk
- Listed platforms are fairly advanced in trading but relatively poor in clearing. Legacy technologies in this space are unable to handle complex instruments.