Morgan Stanley has been chosen as one of the swaps clearing brokers for BlackRock Inc., the world’s largest money manager, ahead of new rules requiring most trades to be processed by clearinghouses.
The largest users of swaps, which comprise the biggest part of the $708 trillion over-the-counter derivative market, such as BlackRock will be mandated to clear their trades under the Dodd-Frank Act, the financial regulation overhaul passed by Congress in 2010 in response to the credit crisis. Morgan Stanley clears trades for customers at a clearinghouse owned by CME Group Inc., Intercontinental Exchange Inc. and LCH.Clearnet Ltd., the bank said in a statement today.
Money managers and hedge funds needs firms such as Morgan Stanley to act as their broker to gain access to swaps clearinghouses, whose members include only the world’s largest banks.
“We believe that OTC clearing can help to reduce systemic risk and serve as an important mechanism to manage and reduce counterparty exposure for our clients,” Supurna VedBrat, co-head of market structure and electronic trading at BlackRock, said in the statement.