There is more that meets the eye to Markit than BOAT. Will Meldrum and Sophia Kandylaki discuss the firm’s panoply of products and services.
When was Markit launched?
Meldrum: Markit was spun out of TD Dominion Toronto (the Canadian based bank) in 2001 as the first independent source of credit derivative pricing. Over the following couple of years, we expanded our suite of products to cover equities, commodities, foreign exchange and fixed income. In 2007 we bought Project Boat, the equities post-trade reporting platform that was created by nine banks (Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, Merrill Lynch, Morgan Stanley and UBS) – to coincide with the launch of MiFID.
How did Markit develop BOAT?
Meldrum: Over the last year, we have worked closely with clients and data vendors to improve the quality of the dataset. We have also worked with the industry to better understand the implications of MiFID and how we could enhance our processes and workflow. We have recently restructured our data packages to make Markit BOAT data more easily available to a wider range of clients. The dataset provides a comprehensive view of the pan-European OTC equity markets. Overall, users have access to trade reports on an average of 20bn of OTC trades in equities every day, equivalent to about 25% of the daily volumes traded on all European equity markets.
What is the new pricing structure you introduced?
Kandylaki: The new schedule, which will become effective this May, includes nine regional data packages. They cover Austria, Eastern Europe, Euronext, Germany, Italy, Scandinavia, Spain, Switzerland and UK. They are targeted at users who do not require a full pan-European licence, which was the only licence available up until now. The structure will also include a new sliding scale discount fee for Markit BOAT’s pan-European data licence based on the number of registered users within a company.
In addition, we have launched a new service that gives users an end-of-day aggregated view of validated trades reported to the Markit BOAT platform. It aims to address the market’s needs for accurate historical trade data and correct measurement of off-exchange trading volumes. We recognise the importance of fine-tuning algorithms and we expect the service to also appeal to risk managers who need official OTC volume data to use as an input into their liquidity tests.
Although people often think of Markit as just BOAT, you claim there is much more to the company. How, and where, have you have expanded your product range?
Meldrum: Our products fall into three categories: – data, valuations and trade processing which operate across all the different assets: equities, credit, fixed income, commodities and foreign exchange. There are also asset class focused products, which includes Markit BOAT, and Markit MSA, which we launched last December. The service collates information on cash and synthetic equity trades executed on primary exchanges, MTFs and OTC markets. We are working with 141 banks including Citi, Dresdner Kleinwort, Deutsche Bank, Goldman Sachs, HSBC, Kepler, Merrill Lynch, Morgan Stanley, Nomura, Panmure Gordon, Royal Bank of Scotland and UBS, who are sending us their trade information.
The data is then consolidated to provide users with a compre- hensive view of market activity. The service ranks brokers on each European trading venue, stock or index according to the volume and value of their trades. The objective is to provide greater insight into the new trading landscape since the introduction of MiFID. The increase in the number of MTFs and dark pools has made it more difficult for market participants to monitor liquidity and market activity. The product shows them who is trading what and, where they are trading, and what share the brokers have.
What is Markit Valuations Manager?
Meldrum: Markit Valuations Manager is one of our most recent product launches and it is the first multi-bank, cross-asset client valuations platform. It provides a secure, standardised view of OTC derivative positions and derivative and cash instrument valuations across counterparties on a single electronic platform. Users will be able to view the bank counterparty valuations alongside Markit’s independent valuations. Currently, portfolio managers receive numerous statements from their counterparties in multiple formats, and this requires several hours of manual consolidation. The product will be integrated with our trade processing service to enable full life cycle support for OTC derivative positions including counterparty position data delivery, normalisation, reconciliation and valuation.
Before the financial crisis, counterparty risk was not such a big issue but now it has become a huge focus of the industry. Cost saving is also high on the agenda. We recently conducted a survey of 50 asset managers that showed that there was an urgent need for this type of service. About 17% of the respondents said that a single file delivery of counterparty statements would save them between 50 and 1,000 hours of work a month while on average respondents estimated time savings of over 49 hours a month.
What is Markit Document Exchange?
Kandylaki: We launched this product last year and it is basically a documentation library that allows the buy- and sellside to post, manage and share compliance, counterparty, credit and regulatory documents securely. Quick access to counterparty information has been become one of the key issues today from a regulatory and compliance standpoint and this product simplifies the process and makes it much more efficient. For example, previously, if you were a new hedge fund and wanted to trade with different banks, this could entail sending and receiving information from say 15 banks and multiple departments within these banks. Our product gives users a platform where they post their documents once and permission them to all their counterparties.
What are your plans for 2009?
Meldrum: We expect 2009 to be an extremely challenging year for global financial markets and we will not be immune from the contraction in global participation. On a more positive note the structural changes present new opportunities for Markit. We are well positioned to participate in areas where the licensing of IP, electronic connectivity of market participants, or provision of data is required.[Biographies] Sophia Kandylaki is a director at Markit and the product manager of Markit BOAT. Prior to this, Kandylaki was the product manager for Markit RED, the industry standard for reference entity and reference obligation identifiers used throughout the credit default swap markets. She holds a Bachelor of Laws degree (LLB) and a Master of Laws (LLM) in banking and finance Law from the Centre for Commercial Law Studies, Queen Mary’s College, University of London. Will Meldrum is a managing director at Markit and head of equity data. Meldrum joined Markit in 2005 as director of acquisitions and strategic development. Prior to this, he worked at Deutsche Bank for four years, managing the bank’s interests across a diverse portfolio of investments with a key focus on industry consortia, electronic trading systems and data. Meldrum holds an MA from Edinburgh University and an MBA from London Business School. ©BEST EXECUTION