CDS Novation Consent System

Background

The Bank needed an automated system for novating CDS trades. It needed flexibility to perform the role of Transferror and Step-Out of an existing trade or be a Transferee and Step-In into a trade.

Implementation

DTCC Novation Consent Platform was chosen as the platform to be used to perform the novation consent workflow. The solution entailed interfacing the CDS trading systems in the bank with the DTCC platform and automating the novation consent process.

The CDS Trading system would feed the trade events in the proprietary format. It would get mapped and enriched into the canonical Fpml based xml and persisted in the Derivatives platform. The enrichment service would extract all the DTCC references for the counterparties involved in the novation. An eligibility service would verify that the trade is eligible for Novation on the DTCC platform based on the static data setup within the bank. A message mapping service would map the Fpml message into the DTCC defined Novation Consent request message. The system would then keep track of all the subsequent actions that occur on the request by listening to the DTCC event updates. Rejections and Errors would raise a workflow task for business users to investigate and resolve. If the selected trade is not eligible for DTCC novation consent platform, it would handle it as a Manual novation. It would generate a draft email containing all the novation details that business users can send out to the parties involved in the novation.

The end result was a streamlined system where users were able to easily step-in or step-out of CDS trades and manage the documentation process with ease. The UI helped users track the progress of each novation consent. Monitoring overdue novation consents helped users to quickly identify counterparties that needed chasing up to complete novation consents.