For clients trading in various different markets around the world and having numerous currencies to transfer, the settlement process can be quite cumbersome.  Typically, exchange traded instruments rely on the role of a clearing house to act as a counterparty to both sides of a trade, thereby breaking the direct counterparty relationship between the two trading counterparties.  This is fundamental to the integrity and credibility of the market, as its purpose is to guarantee the performance of each and every transaction.

The settlement of OTC products, however, is determined by the terms of the product as agreed to by the two counterparties.  In many cases, standard settlement characteristics for products exist.  Settlement events are triggered by such things as effective date, reset date and payment date for swaps, and premium convention, exercise date and trigger events for options.  There are also events that are either mandatory or optional when maturity of a derivative is reached.

ATI’s experts are proficient in dealing with the terms of any OTC transaction.   We understand that each new OTC trade can potentially constitute a new set of terms, even though the product may be the same.  ISDA master documentation covers the bulk of the provisions relevant to enforcing the terms of the agreement.  However, client specific negotiation may alter any of the following conditions that, in turn, would affect standard settlement procedures:

• Payment Provisions
• Default Procedures
• Termination Events
• Tax Indemnities
• Notices
• Assignment
• Legal Jurisdiction
• Events Calendar

The efficient settlement of OTC products requires a high degree of skill in managing the flow of information at trading, immediately after trading, and for the duration of the term of the transaction. ATI also specializes in DTCC’s Trade Information Warehouse process automation, along with the electronic settlement and payment processes that are contained within the repository’s functionality. 

With the ever growing use of OTC products, and the inherent complexity in their structure and settlement processes, ATI can help design, refine and automate workflow so that counterparties and clients are efficient in the direction of complete settlement certainty.