IntercontinentalExchange(R) (NYSE:ICE) ,today announced that ICE US Trust, LLC (ICE Trust), a New York limited liability trust company, will begin processing and clearing credit default swap (CDS) index transactions on March 9, 2009. Clearing of North American Markit CDX indexes is expected to be followed by liquid single-name CDS in the following months. ICE Trust has entered into an agreement with Markit to produce daily settlement prices required for mark-to-market pricing, margining and clearing.
ICE also announced the closing of its acquisition of The Clearing Corporation (TCC) on March 6, 2009. TCC developed the CDS risk management framework, operational processes and infrastructure for ICE Trust's clearing operations.
The U.S. Securities and Exchange Commission (SEC) today issued an exemptive order permitting ICE Trust to clear CDS transactions. In December 2008, ICE Trust received approval from the New York State Banking Department (NYBD), and on March 5, 2009, the Superintendent of the NYBD issued the authorization certificate to ICE Trust to commence business as a regulated bank based in New York. These approvals, combined with the Federal Reserve Board of Governors' approval received on March 4, mark the completion of the required regulatory reviews prior to the launch of ICE Trust.
"Regulatory approval allows ICE Trust to bring to market the most comprehensive range of CDS clearing and risk management services available today," said Jeffrey C. Sprecher, Chairman and CEO of ICE. "ICE Trust has been designed to further enhance well-functioning CDS markets by reducing counterparty and systemic risks, and increasing transparency and capital efficiency in the CDS markets. ICE will continue to work closely with the Federal Reserve and other regulatory bodies in the U.S. and abroad in implementing risk management solutions for the vital credit markets."
"Robust counterparty risk management is a cornerstone to the success of privately negotiated derivatives and of the ISDA architecture," said Eraj Shirvani, ISDA Chairman and Head of Fixed Income for EMEA, Credit Suisse. "The development of options that deliver strength, flexibility and transparency to clearing and settlement are key to the evolution of CDS. We in the industry welcome solutions that help us achieve these goals."
Bank of America, Barclays Capital, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Merrill Lynch, Morgan Stanley and UBS have supported the establishment of the clearing house for CDS transactions, and are the initial clearing members of ICE Trust. Each of these participants has completed a rigorous technical testing and validation process over the past several months. In addition, each member has made a significant contribution to establish the ICE Trust guaranty fund, which will continue to increase as positions are transferred into the clearing house.
TCC's risk management systems were developed internally based on a proprietary risk assessment methodology designed specifically for the CDS market, and have been reviewed and validated by Finance Concepts, an independent risk management consultancy, as part of the regulatory review process. TCC's methodology will be used by the clearing house to determine initial and variation margin requirements, guaranty fund requirements and official daily settlement prices.
Showing posts with label credit default swap. Show all posts
Showing posts with label credit default swap. Show all posts
Friday, 6 March 2009
Friday, 7 November 2008
Tradeweb Upgrades CDS Indices Marketplaces
Tradeweb, upgraded its marketplaces in the U.S. and Europe for Credit Default Swap Indices. As a result, clients will be able to view real-time composite prices, and efficiently execute and process trades for the major CDS indices. The U.S. market is live, with Europe expected to launch in January 2009.
This initiative supports the goals voiced by financial regulators in recent weeks by providing increased price transparency, a marketplace for electronic trading and connectivity to relevant third parties for electronic processing and legal confirmation of CDS index trades.
The new marketplaces will benefit institutional clients by:
-- Providing access to the liquidity of leading CDS dealers;
-- Displaying real-time, indicative composite two-way pricing for the major U.S. and European CDS indices;
-- Providing connectivity to key third parties, including DTCC Deriv/SERV (and the Trade Information Warehouse), and order management systems where relevant;
-- Maintaining a full audit trail on all trades;
-- Electronically capturing trade details in real-time, using the Tradeweb API messaging service;
-- Providing access to AccountNet, Tradeweb's leading derivatives account database to maintain accurate settlement instructions and deliver electronic allocations to dealers.
These CDS Index marketplaces offer a broad level of commitment from the major dealers, sophisticated new trading protocols for institutional clients and real-time pricing to provide a high degree of market transparency. They demonstrate Tradeweb's ability to evolve the electronic trading environment to meet changing market needs.
The markets will provide a new trading protocol, "Request-for-Market," in addition to enhanced "Request-for-Quote" functionality, pioneered by Tradeweb in the late-1990s. RFM allows a client to request a two-sided market and negotiate interactively with a single dealer, while RFQ allows clients to request a price from up to four dealers simultaneously.
"We have been working with the buy-side and supporting dealers for months to bring an enhanced electronic marketplace for trading CDS indices. Especially given the current market turmoil, we are confident that Tradeweb's inherent transparency and efficiency for OTC markets will provide a compelling trading mechanism for the market," said Lee Olesky, CEO of Tradeweb.
"As one of the leading CDS dealers, we are keen to provide solutions that allow our clients to trade more effectively. We support the growth of electronic trading as it provides for a more efficient marketplace and look forward to using Tradeweb as a distribution channel for better servicing our clients in the CDS market," said Eraj Shirvani, Head of European Credit at Credit Suisse and Chairman of the International Swaps and Derivatives Association.
"We are proud to support CDS index trading on the Tradeweb platform," said Rob Milam, Managing Director, Head of North American High Grade Credit Trading at J.P. Morgan. "It will allow us to expand our client service and provide another efficient trading and settlement process."
"We believe the liquidity that clients will find on Tradeweb will prove to be very compelling, and the capabilities for automated trade booking will benefit all market participants," said Brian Walter, Managing Director, Head of U.S. Credit Index Trading at UBS.
"Tradeweb has successfully introduced greater transparency and efficiency to the fixed income and derivatives markets over the past decade," said Vic Simone, Managing Director of Goldman Sachs and Chairman of Tradeweb. "It makes sense that they are leading the way in providing the same kind of benefits to the CDS market."
This initiative supports the goals voiced by financial regulators in recent weeks by providing increased price transparency, a marketplace for electronic trading and connectivity to relevant third parties for electronic processing and legal confirmation of CDS index trades.
The new marketplaces will benefit institutional clients by:
-- Providing access to the liquidity of leading CDS dealers;
-- Displaying real-time, indicative composite two-way pricing for the major U.S. and European CDS indices;
-- Providing connectivity to key third parties, including DTCC Deriv/SERV (and the Trade Information Warehouse), and order management systems where relevant;
-- Maintaining a full audit trail on all trades;
-- Electronically capturing trade details in real-time, using the Tradeweb API messaging service;
-- Providing access to AccountNet, Tradeweb's leading derivatives account database to maintain accurate settlement instructions and deliver electronic allocations to dealers.
These CDS Index marketplaces offer a broad level of commitment from the major dealers, sophisticated new trading protocols for institutional clients and real-time pricing to provide a high degree of market transparency. They demonstrate Tradeweb's ability to evolve the electronic trading environment to meet changing market needs.
The markets will provide a new trading protocol, "Request-for-Market," in addition to enhanced "Request-for-Quote" functionality, pioneered by Tradeweb in the late-1990s. RFM allows a client to request a two-sided market and negotiate interactively with a single dealer, while RFQ allows clients to request a price from up to four dealers simultaneously.
"We have been working with the buy-side and supporting dealers for months to bring an enhanced electronic marketplace for trading CDS indices. Especially given the current market turmoil, we are confident that Tradeweb's inherent transparency and efficiency for OTC markets will provide a compelling trading mechanism for the market," said Lee Olesky, CEO of Tradeweb.
"As one of the leading CDS dealers, we are keen to provide solutions that allow our clients to trade more effectively. We support the growth of electronic trading as it provides for a more efficient marketplace and look forward to using Tradeweb as a distribution channel for better servicing our clients in the CDS market," said Eraj Shirvani, Head of European Credit at Credit Suisse and Chairman of the International Swaps and Derivatives Association.
"We are proud to support CDS index trading on the Tradeweb platform," said Rob Milam, Managing Director, Head of North American High Grade Credit Trading at J.P. Morgan. "It will allow us to expand our client service and provide another efficient trading and settlement process."
"We believe the liquidity that clients will find on Tradeweb will prove to be very compelling, and the capabilities for automated trade booking will benefit all market participants," said Brian Walter, Managing Director, Head of U.S. Credit Index Trading at UBS.
"Tradeweb has successfully introduced greater transparency and efficiency to the fixed income and derivatives markets over the past decade," said Vic Simone, Managing Director of Goldman Sachs and Chairman of Tradeweb. "It makes sense that they are leading the way in providing the same kind of benefits to the CDS market."
Sunday, 2 November 2008
ICE and The Clearing Corporation CDS Agreement
IntercontinentalExchange, Inc. and The Clearing Corporation (TCC), today announced new agreements intended to advance their previously announced joint global clearing solution for Credit Default Swaps (CDS). Together with nine of the major global investment banks who are dealers in the CDS markets, ICE and TCC have entered into memorandums of understanding (MOUs) to develop a joint global clearing solution and to effect the acquisition of TCC by ICE.
Under the terms of the new agreements, ICE will acquire TCC and will form ICE US Trust (ICE Trust), a New York limited purpose trust company and subsidiary of ICE, with the support of Bank of America, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Merrill Lynch, Morgan Stanley and UBS. As previously announced, ICE and TCC continue to work closely with regulators, other market participants and industry groups to develop a comprehensive central counterparty clearing solution for the CDS market. This customized solution is currently undergoing final testing in preparation for launch.
"ICE has been a long-time believer in the value that clearing brings to market participants, and we've demonstrated that belief by creating innovative clearing and risk management solutions in both the futures and the over-the-counter markets," said ICE Chairman and CEO Jeffrey C. Sprecher. "We have made a commitment to developing a market structure that reduces risk and increases transparency and capital efficiency in these important global markets, first through our acquisition of Creditex, and now through our planned acquisition of The Clearing Corporation. Both of these organizations have demonstrated strong dedication to the CDS community."
"TCC has served as a credit intermediary in a broad range of markets since 1925, and the CDS market represents an excellent opportunity to apply our expertise," said Kevin R. McClear, Chief Operating Officer of TCC. "Our work over the last two years has laid a strong foundation for a market-based solution that will significantly reduce counterparty risk and is intended to address applicable regulatory requirements."
The Boards of Directors of ICE and TCC have approved the MOUs, specific terms of which have not been disclosed at this time. The transaction is subject to the receipt of required government approvals. The parties will work toward receiving the necessary governmental approvals while working to execute definitive documents during the fourth quarter of 2008, by which time they expect to begin clearing CDS transactions through ICE Trust. Post-transaction TCC will continue to support its existing clearing customers.
Under the terms of the new agreements, ICE will acquire TCC and will form ICE US Trust (ICE Trust), a New York limited purpose trust company and subsidiary of ICE, with the support of Bank of America, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Merrill Lynch, Morgan Stanley and UBS. As previously announced, ICE and TCC continue to work closely with regulators, other market participants and industry groups to develop a comprehensive central counterparty clearing solution for the CDS market. This customized solution is currently undergoing final testing in preparation for launch.
"ICE has been a long-time believer in the value that clearing brings to market participants, and we've demonstrated that belief by creating innovative clearing and risk management solutions in both the futures and the over-the-counter markets," said ICE Chairman and CEO Jeffrey C. Sprecher. "We have made a commitment to developing a market structure that reduces risk and increases transparency and capital efficiency in these important global markets, first through our acquisition of Creditex, and now through our planned acquisition of The Clearing Corporation. Both of these organizations have demonstrated strong dedication to the CDS community."
"TCC has served as a credit intermediary in a broad range of markets since 1925, and the CDS market represents an excellent opportunity to apply our expertise," said Kevin R. McClear, Chief Operating Officer of TCC. "Our work over the last two years has laid a strong foundation for a market-based solution that will significantly reduce counterparty risk and is intended to address applicable regulatory requirements."
The Boards of Directors of ICE and TCC have approved the MOUs, specific terms of which have not been disclosed at this time. The transaction is subject to the receipt of required government approvals. The parties will work toward receiving the necessary governmental approvals while working to execute definitive documents during the fourth quarter of 2008, by which time they expect to begin clearing CDS transactions through ICE Trust. Post-transaction TCC will continue to support its existing clearing customers.
Friday, 10 October 2008
Credit Default Swap Clearing House Inches Forward
A group of leading credit derivative market participants today announced they have joined forces to support a joint global clearing solution for Credit Default Swaps (CDS). Signatories to the letter of intent include The Clearing Corporation, Markit Group, Risk Metrics, and IntercontinentalExchange, Inc. (NYSE:ICE) through its subsidiaries, including ICE US Trust, a New York limited Trust Company (ICE Trust), Creditex and T-Zero. ICE Trust will operate as a New York limited Trust Company and function as global clearinghouse and central counterparty for CDS transactions. ICE Trust plans to become a member of the Federal Reserve System. The letter signals the intention of the signatories to use their best efforts to work together in establishing a clearinghouse that will accomplish the objectives established by the Federal Reserve Bank of New York.
Tuesday, 7 October 2008
CME Group and Citadel Claim First Central Counterparty Clearing Facility
CME Group and Citadel Investment Group, L.L.C., a leading alternative investment and technology firm, today announced they have executed a non-binding term sheet to launch a joint venture company within 30 days, which will be the first electronic trading platform that is fully integrated with a central counterparty clearing facility for Credit Default Swaps (CDS). CME Clearing, the world's largest derivatives clearing house, will be the central counterparty for this solution.
The joint venture will operate as an independent organization with its own board of directors and management team. CME Group and Citadel have invited major CDS market participants to join as Founding Members by allocating up to 30 percent of the equity in the venture, and by offering certain market maker privileges to such Founding Members. The equity and market maker incentives are designed to encourage participants to both migrate existing positions and to trade new CDS contracts on the platform.
As a fully integrated trading and clearing solution, the joint venture will provide the following benefits to market participants:
-- Enhanced liquidity through standardized contracts with fixed coupons for all the leading CDS indices and their underlying single-name components, with OTC market conventions, including credit event procedures;
-- CME Group's well-established clearing, settlement and risk management capabilities with Citadel's state-of-the-art technology for price discovery, matching engine, and risk management analytics;
-- Facilities to convert existing bilateral trades to standardized contracts and straight through processing into CME Clearing, reducing bilateral credit risks, outstanding notional balances and capital requirements while providing more flexibility for trading in and out of existing positions; and,
-- The joint venture has entered into preliminary licensing discussions with Markit, a leading financial information services company that owns the most widely traded CDS indices and Markit RED, the industry-standard CDS identifiers.
In today's environment, effective risk management is more important than ever as investors seek transparent, secure and liquid market alternatives, particularly for credit default swaps," said CME Group Executive Chairman Terry Duffy. "Combining Citadel's leading CDS technology with the renowned safety and soundness of CME Clearing, this joint venture is a best-of-both-worlds solution that will reduce much of the systematic risk inherent in the current CDS market structure."
"It is imperative to bring stability and transparency to the CDS market," said Ken Griffin, Founder and CEO of Citadel Investment Group. "This venture is a comprehensive, state-of-the-art solution that addresses today's immediate concerns and provides tremendous opportunity for market users into the future."
"Recent market events highlight the urgent need to reduce counterparty credit risks in the CDS market as well as the other over-the-counter markets. Our innovative new partnership with Citadel, and our invitation to leading market participants to join this first-ever integrated solution, is a key turning point in improving the functioning of these important markets," said Craig Donohue, Chief Executive Officer of CME Group. "This platform provides an important opportunity for market participants to demonstrate to customers and regulators alike how these markets can be better organized to meet legitimate hedging and trading needs while reducing operational and credit risks that have grown unchecked in the OTC market."
The joint venture will operate as an independent organization with its own board of directors and management team. CME Group and Citadel have invited major CDS market participants to join as Founding Members by allocating up to 30 percent of the equity in the venture, and by offering certain market maker privileges to such Founding Members. The equity and market maker incentives are designed to encourage participants to both migrate existing positions and to trade new CDS contracts on the platform.
As a fully integrated trading and clearing solution, the joint venture will provide the following benefits to market participants:
-- Enhanced liquidity through standardized contracts with fixed coupons for all the leading CDS indices and their underlying single-name components, with OTC market conventions, including credit event procedures;
-- CME Group's well-established clearing, settlement and risk management capabilities with Citadel's state-of-the-art technology for price discovery, matching engine, and risk management analytics;
-- Facilities to convert existing bilateral trades to standardized contracts and straight through processing into CME Clearing, reducing bilateral credit risks, outstanding notional balances and capital requirements while providing more flexibility for trading in and out of existing positions; and,
-- The joint venture has entered into preliminary licensing discussions with Markit, a leading financial information services company that owns the most widely traded CDS indices and Markit RED, the industry-standard CDS identifiers.
In today's environment, effective risk management is more important than ever as investors seek transparent, secure and liquid market alternatives, particularly for credit default swaps," said CME Group Executive Chairman Terry Duffy. "Combining Citadel's leading CDS technology with the renowned safety and soundness of CME Clearing, this joint venture is a best-of-both-worlds solution that will reduce much of the systematic risk inherent in the current CDS market structure."
"It is imperative to bring stability and transparency to the CDS market," said Ken Griffin, Founder and CEO of Citadel Investment Group. "This venture is a comprehensive, state-of-the-art solution that addresses today's immediate concerns and provides tremendous opportunity for market users into the future."
"Recent market events highlight the urgent need to reduce counterparty credit risks in the CDS market as well as the other over-the-counter markets. Our innovative new partnership with Citadel, and our invitation to leading market participants to join this first-ever integrated solution, is a key turning point in improving the functioning of these important markets," said Craig Donohue, Chief Executive Officer of CME Group. "This platform provides an important opportunity for market participants to demonstrate to customers and regulators alike how these markets can be better organized to meet legitimate hedging and trading needs while reducing operational and credit risks that have grown unchecked in the OTC market."
Tuesday, 23 September 2008
IDX Capital
IDX Capital, LLC is an inter dealer broker of credit default swaps matching wholesale market buyers and seller for a fee. IDX Capital has been a long time market pioneer of electronic trading initiatives in credit default swap space.
Wednesday, 3 September 2008
New Trade Terms
"CDX North America
A portfolio of credit-default swaps of the most volatile entities contained in the Dow Jones CDX North America Investment Grade index. The
Dow Jones CDX North America Investment Grade index is a portfolio of credit-default swaps of investment grade entities domiciled in North
America. The portfolio is constructed with the objective of enhancing overall liquidity."
Covered Bond
A bond backed by specific pools of public sector loans or mortgages. It has an additional guarantee.
iHub
Hosted business communications provider
ISM
Insttitue of Supply Management
iTraxx Europe
Index of credit default swaps, collated on behalf of Markit. Tthe most liquid 125 CDS referencing European investment grade credits, subject to certain sector rules as determined by the IIC and also as determined by the SEC.
A portfolio of credit-default swaps of the most volatile entities contained in the Dow Jones CDX North America Investment Grade index. The
Dow Jones CDX North America Investment Grade index is a portfolio of credit-default swaps of investment grade entities domiciled in North
America. The portfolio is constructed with the objective of enhancing overall liquidity."
Covered Bond
A bond backed by specific pools of public sector loans or mortgages. It has an additional guarantee.
iHub
Hosted business communications provider
ISM
Insttitue of Supply Management
iTraxx Europe
Index of credit default swaps, collated on behalf of Markit. Tthe most liquid 125 CDS referencing European investment grade credits, subject to certain sector rules as determined by the IIC and also as determined by the SEC.
New Trade Terms
"CDX North America
A portfolio of credit-default swaps of the most volatile entities contained in the Dow Jones CDX North America Investment Grade index. The
Dow Jones CDX North America Investment Grade index is a portfolio of credit-default swaps of investment grade entities domiciled in North
America. The portfolio is constructed with the objective of enhancing overall liquidity."
Covered Bond
A bond backed by specific pools of public sector loans or mortgages. It has an additional guarantee.
iHub
Hosted business communications provider
ISM
Insttitue of Supply Management
iTraxx Europe
Index of credit default swaps, collated on behalf of Markit. Tthe most liquid 125 CDS referencing European investment grade credits, subject to certain sector rules as determined by the IIC and also as determined by the SEC.
A portfolio of credit-default swaps of the most volatile entities contained in the Dow Jones CDX North America Investment Grade index. The
Dow Jones CDX North America Investment Grade index is a portfolio of credit-default swaps of investment grade entities domiciled in North
America. The portfolio is constructed with the objective of enhancing overall liquidity."
Covered Bond
A bond backed by specific pools of public sector loans or mortgages. It has an additional guarantee.
iHub
Hosted business communications provider
ISM
Insttitue of Supply Management
iTraxx Europe
Index of credit default swaps, collated on behalf of Markit. Tthe most liquid 125 CDS referencing European investment grade credits, subject to certain sector rules as determined by the IIC and also as determined by the SEC.
Friday, 22 August 2008
Derivatives - A
ABCDS
A credit default swap based on an Asset-Backed Security itself based on relatively risky home equity loans (U.S.) In effect a type of insurance against default on the underlying ABS.
ABCP
Taiwan: Asset-Backed Commercial Paper
ABI
Association of British Insurers
Alpha
Hedge Funds: the incremental return above the market that a manager generates.
American-Style Option
Option contract which can be excercised at any time between the purchase date and the expiration date. Most commonly exchange-traded option in the U.S.
Arbitrage
Simultaneous sale and purchase of identical or equivalent financial instruments or commodity futures to benefit from a discrepancy in their prices.
Assignment
Receipt of an exercise notice by an option writer (seller) that obligates him to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price.
At-the-money
Occurs if the strike price of the option is equal to the market price of underlying security.
A credit default swap based on an Asset-Backed Security itself based on relatively risky home equity loans (U.S.) In effect a type of insurance against default on the underlying ABS.
ABCP
Taiwan: Asset-Backed Commercial Paper
ABI
Association of British Insurers
Alpha
Hedge Funds: the incremental return above the market that a manager generates.
American-Style Option
Option contract which can be excercised at any time between the purchase date and the expiration date. Most commonly exchange-traded option in the U.S.
Arbitrage
Simultaneous sale and purchase of identical or equivalent financial instruments or commodity futures to benefit from a discrepancy in their prices.
Assignment
Receipt of an exercise notice by an option writer (seller) that obligates him to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price.
At-the-money
Occurs if the strike price of the option is equal to the market price of underlying security.
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