SimCorp Partners with OTCX for Derivatives Best Execution

Australian investment firm Merlon Capital Partners was the first SimCorp user to test the OTCX platform.

The OTCX integration will give SimCorp users access to OTC liquidity across multiple dealers and asset classes.

The multi-dealer OTCX platform covers over-the-counter (OTC) instruments such as interest rate and equity derivatives, and structured products, and is being integrated with SimCorp’s core investment system, Dimension. Importantly, the partnership gives users a full audit trail of their trading activity, providing proof of best execution in line with regulatory requirements.

Best execution, and the ability to prove it, has become a hot-button topic across asset classes. Once a primary concern of equity markets, in Europe, the review of the Markets in Financial Instruments (Mifid II) has brought a range of instruments under the purview of best-execution requirements, including rates, equity credit and currency derivatives that have traditionally been traded OTC.

The Australian fund manager Merlon Capital Partners, which has around $1.6 billion in assets under management, was the first SimCorp client to pilot the platform, sourcing and trading a range of derivatives. Andrew Fraser, head of trading at Merlon said that the OTCX platform simplified the firm’s OTC workflow.

“It enabled us to evidence, on demand, our best execution process,” he said in a statement accompanying SimCorp’s announcement. 

The firm expects that the integration will allow users to benefit from trade reconstruction, compliance with best execution policy and the inclusion of UTC clock timestamps. Clients will also benefit from automation in certain trade processes through OTCX and Dimension’s straight-through processing, which introduces the ability to eliminate elements of the trade life cycle that have traditionally been manual in nature, such as reconciling email, voice and chat data.

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