Trlpc markit acquires systems integration software from jpm for loan mark

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Feb 9 Markit, the financial data company, has acquired systems integration software from JP Morgan that will help to connect different loan processing programs and reduce the time it takes to close the sale of a syndicated loan. Regulators have criticized lengthy settlement times in the US$870bn loan market, concerned that the average 19.3 days it currently takes to close a loan trade may pose a problem for mutual funds if a large number of investors ask for their money back during a downturn. The software, known as middleware because it connects operating systems and applications, will integrate with the loan trade settlement platform Markit Clear and help with straight-through processing that eliminates manually inputting information, according to Markit. When two parties agree on a trade, they would enter the transaction information into their own loan accounting ledger systems. Using the systems integration software, the information would then be transferred to Markit Clear, where the trade is settled. By electronically connecting bank systems that track ownership with the settlement platform, trades can settle faster. It currently takes more than six times longer to complete a loan trade than a bond trade."This middleware is essentially at the core of the loan market ecosystem that will provide seamless integration among systems and straight-through-processing of loan servicing and settlement data," Scott Kostyra, head of loan settlement at Markit, said in an e-mail. "This efficiency gain is, in itself, important, but will also contribute to bringing down loan trade settlement times."

In a September proposal to improve liquidity risk management, the US Securities and Exchange Commission (SEC) said that long bank loan settlements may create a mismatch when funds try to return investor money. Mutual funds need to meet redemption requests in seven days, much faster than the average time it takes to complete a trade for a syndicated loan, a financing provided by a group of lenders. Open-end mutual funds, which allow for daily liquidity, are prevalent in 401k retirement plans and 529 plans for college savings. At the end of 2014, 53.2m households owned mutual funds, SEC Chair Mary Jo White said last year.

The loan trade group, the Loan Syndications and Trading Association (LSTA), recommends loan trades close in seven days. It takes three days to complete a bond trade. A number of parties are working on initiatives to improve loan settlement times, including developing a standard electronic messaging system for the asset class. The International Swaps and Derivatives Association may release the final version of Financial products Markup Language (FpML) for settlement information between a bank arranging a loan and its trade counterparties later this year, sources said. The systems integration software will help the market begin to use Markit Clear as well as FpML to communicate information to lenders using electronic messaging, according to Markit. Customers may begin using the software in the second half of 2016.

Financial terms of the acquisition were not disclosed. Separately, last month Markit announced it had agreed to acquire the position reconciliation technology assets of DTCC Loan/SERV, a unit of the Depository Trust & Clearing Corp (DTCC). Agent banks and lenders can post their commitment balances to the DTCC Loan/SERV reconciliation program to ensure their records match, which the DTCC says can reduce incorrect accrual amounts and reduce adjustments in cash positions that may need to be resolved after cash payments have been made."Along with our recent acquisition of the loan position reconciliation assets from DTCC, [this software acquisition] will significantly expedite the adoption of Markit Clear, FpML and other industry initiatives that have been in development," Kostyra said.