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 derivatives. Show all posts
Showing posts with label credit derivatives. Show all posts
Friday, 6 March 2009
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.
Tuesday, 21 October 2008
NumeriX and NxR2 Try Valuing Credit Instruments
NumeriX and R2 Financial Technologies, today announced the availability of NxR2, the first solution of its kind designed to enable easier and more accurate pricing and valuation of the complete spectrum of cash and synthetic credit instruments. The application provides consistent valuation and risk analytics for credit products, which incorporate detailed information at the collateral level for credit derivatives and structured finance transactions.
In 2008, NumeriX and R2 made a conscious decision to combine their expertise in pricing analytics and risk management to develop the tools necessary to find transparency in an opaque market. As the credit markets continue to be mired in uncertainty, it is only through technological innovation that can connect best-of-breed data sources with advanced analytics that market participants will achieve the level of granularity and transparency needed to make more informed decisions about new investments and existing credit portfolios.
“The credit crisis has highlighted the need for transparency on the contents and structure of these complex securities, as well as for effective valuation and risk methodologies”, said Dr. Dan Rosen, CEO at R2. “Our vision is to provide packaged advanced analytics with detailed credit data, scenario capabilities, productivity and reporting tools, in order to perform reliable valuations, and understand the key underlying risks and concentrations in structured credit portfolios and strategies. This will allow business users to make better investment decisions and discriminate between securities, as well as manage their risk, and satisfy regulatory requirements.”
NxR2 is a Windows-based application allowing investors to gain a greater understanding of their portfolios. NxR2 provides full connectivity to the world-class data providers specializing in the credit markets: Bloomberg, Markit and Intex. By integrating Bloomberg and Markit’s pricing data alongside Intex’s deal libraries and cash-flow generation functionality, NumeriX has developed the most comprehensive and transparent valuation and risk analytic solution. In addition, its open interface and design allow the effective integration of other generic cash-flow libraries and credit data.
Capabilities and features of NxR2 include:
• Advanced pricing and risk analytics, including the detailed, integrated valuation of Cash and Synthetic CDOs and scenario generation, with the ability to set assumptions at the desired level of granularity.
• Immediate access to trade-ready information with complete instrument coverage including ABSs/RMBS/CMBS, cash CDOs (CLO, CBO, ABS CDO), synthetic CDOs and CDS Indices, bespoke CDOs, as well as single-name credit products, including CDSs, loans and bonds.
• Real-time pricing, cash-flow and exposure reports, as well as sensitivity analytics, enabling transparent and informed investment decisions.
• An effective work-flow and productivity tool to price and profile investment strategies, giving the buy-side comprehensive data management.
• Advanced pricing analytics powered by NumeriX 7.
“We recognized the lack of readily-available tools for traders to accurately price structured credit products,” said Steven R. O’Hanlon, President and Chief Operating Officer at NumeriX. “NxR2 brings greater understanding of the market for credit derivative products and structured finance by providing the tools to credit investors and dealers to more effectively manage the risk exposure of these products.”
In 2008, NumeriX and R2 made a conscious decision to combine their expertise in pricing analytics and risk management to develop the tools necessary to find transparency in an opaque market. As the credit markets continue to be mired in uncertainty, it is only through technological innovation that can connect best-of-breed data sources with advanced analytics that market participants will achieve the level of granularity and transparency needed to make more informed decisions about new investments and existing credit portfolios.
“The credit crisis has highlighted the need for transparency on the contents and structure of these complex securities, as well as for effective valuation and risk methodologies”, said Dr. Dan Rosen, CEO at R2. “Our vision is to provide packaged advanced analytics with detailed credit data, scenario capabilities, productivity and reporting tools, in order to perform reliable valuations, and understand the key underlying risks and concentrations in structured credit portfolios and strategies. This will allow business users to make better investment decisions and discriminate between securities, as well as manage their risk, and satisfy regulatory requirements.”
NxR2 is a Windows-based application allowing investors to gain a greater understanding of their portfolios. NxR2 provides full connectivity to the world-class data providers specializing in the credit markets: Bloomberg, Markit and Intex. By integrating Bloomberg and Markit’s pricing data alongside Intex’s deal libraries and cash-flow generation functionality, NumeriX has developed the most comprehensive and transparent valuation and risk analytic solution. In addition, its open interface and design allow the effective integration of other generic cash-flow libraries and credit data.
Capabilities and features of NxR2 include:
• Advanced pricing and risk analytics, including the detailed, integrated valuation of Cash and Synthetic CDOs and scenario generation, with the ability to set assumptions at the desired level of granularity.
• Immediate access to trade-ready information with complete instrument coverage including ABSs/RMBS/CMBS, cash CDOs (CLO, CBO, ABS CDO), synthetic CDOs and CDS Indices, bespoke CDOs, as well as single-name credit products, including CDSs, loans and bonds.
• Real-time pricing, cash-flow and exposure reports, as well as sensitivity analytics, enabling transparent and informed investment decisions.
• An effective work-flow and productivity tool to price and profile investment strategies, giving the buy-side comprehensive data management.
• Advanced pricing analytics powered by NumeriX 7.
“We recognized the lack of readily-available tools for traders to accurately price structured credit products,” said Steven R. O’Hanlon, President and Chief Operating Officer at NumeriX. “NxR2 brings greater understanding of the market for credit derivative products and structured finance by providing the tools to credit investors and dealers to more effectively manage the risk exposure of these products.”
Tuesday, 14 October 2008
Knight Capital Derivatives Platform
Knight Capital Group, Inc. (NASDAQ:NITE) today introduced NetDelta(TM), an electronic settlement platform for the credit derivatives market. NetDelta addresses market infrastructure inefficiencies and underlying risks inherent in OTC derivatives by providing buy- and sell-side firms with comprehensive, real-time solutions for entering, maintaining and exiting new positions. NetDelta will also be able to reduce counterparty risk for existing positions in the near future.
"NetDelta was designed to address unnecessary counterparty risk, balance sheet inefficiencies, settlement lags, valuation issues and a lack of liquidity," said Lucio Biase, Managing Director, NetDelta, LLC. "NetDelta provides the automation and infrastructure the $54.6 trillion credit derivatives market needs."
The NetDelta solution benefits traders, prime brokerages, risk managers, controllers and settlement groups. It is applicable to new trades and will soon be applicable to existing positions in a firm's portfolio as well. The NetDelta offering also addresses many of the key principles recently set forth by the Operations Management Group (OMG) and President's Working Group (PWG) - both of which aim to instill a clear, functional and well-designed infrastructure that can meet the needs of the OTC derivatives markets.
"We are excited to bring NetDelta to the OTC derivatives markets in these challenging times," said Thomas M. Joyce, Chairman and Chief Executive Officer, Knight Capital Group. "We believe NetDelta is an ideal solution for the entire lifecycle of credit derivative trades. Importantly, the NetDelta solution supports the credit derivative market makers who are so vital to the health of the market."
The platform's modular technology allows for simple integration into existing trading platforms, settlement services and reporting engines. In addressing market infrastructure and legacy issues, the NetDelta solution renders unwinds and novations obsolete for positions cleared on NetDelta. NetDelta also allows for greater transparency of the value of each position without disclosing pivotal market making data. At present, NetDelta is internally beta testing the platform and in the process of onboarding clients.
"NetDelta was designed to address unnecessary counterparty risk, balance sheet inefficiencies, settlement lags, valuation issues and a lack of liquidity," said Lucio Biase, Managing Director, NetDelta, LLC. "NetDelta provides the automation and infrastructure the $54.6 trillion credit derivatives market needs."
The NetDelta solution benefits traders, prime brokerages, risk managers, controllers and settlement groups. It is applicable to new trades and will soon be applicable to existing positions in a firm's portfolio as well. The NetDelta offering also addresses many of the key principles recently set forth by the Operations Management Group (OMG) and President's Working Group (PWG) - both of which aim to instill a clear, functional and well-designed infrastructure that can meet the needs of the OTC derivatives markets.
"We are excited to bring NetDelta to the OTC derivatives markets in these challenging times," said Thomas M. Joyce, Chairman and Chief Executive Officer, Knight Capital Group. "We believe NetDelta is an ideal solution for the entire lifecycle of credit derivative trades. Importantly, the NetDelta solution supports the credit derivative market makers who are so vital to the health of the market."
The platform's modular technology allows for simple integration into existing trading platforms, settlement services and reporting engines. In addressing market infrastructure and legacy issues, the NetDelta solution renders unwinds and novations obsolete for positions cleared on NetDelta. NetDelta also allows for greater transparency of the value of each position without disclosing pivotal market making data. At present, NetDelta is internally beta testing the platform and in the process of onboarding clients.
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."
Thursday, 11 September 2008
Babson Capital Management Award
Babson Capital Management has been named 2008 Best Cash CDO Manager by Creditflux magazine, the second straight year it has earned the recognition despite drastically different market conditions.
Creditflux, based in London, is a leading information source worldwide for the credit derivatives and structured-credit markets, publishing a monthly newsletter, online daily news and a comprehensive database of collateralized debt obligations. The magazine uses comprehensive data analysis exclusively to determine its honorees, and the award is based purely on quantitative performance metrics. More than 300 CDOs were submitted for recognition this year. The magazine's inaugural awards were issued in September 2007.
"We are delighted to be named Best Cash CDO Manager for the second year in a row. It is a great honor and recognizes the hard work by the many skilled individuals within Babson Capital," said Thomas Finke, President of Babson Capital. "The recognition for our overall performance versus our peers speaks for the quality and consistency across our firm."
"It has been a difficult 12 months since the last awards," Creditflux noted in its August issue when nominees were announced. "New CDO issuance has plummeted ... But, as these finalists show, this has not prevented many managers [from] providing strong returns for their investors ... Asset managers are looking to the future, and are eager to show the world just how good their track record is."
The nominations for individual awards included the Duchess V CLO, nominated as Best European cash CLO - seasoned, and Duchess VI CLO, nominated as Best European cash CLO - recent, both managed by Babson Capital Europe, a subsidiary of Babson Capital based in London. The Babson CLO 2007-I, managed by the U.S. Bank Loan Team in Charlotte, N.C., was nominated as Best Cash CLO - recent.
For the Best Cash CDO Manager award, all deals that a firm had under management were compared with its peers. Through its CDO/CLO businesses in Springfield, Mass., and Charlotte and Babson Capital Europe, the firm manages more than $22 billion in 57 CDOs as of June 30, 2008.
Creditflux, based in London, is a leading information source worldwide for the credit derivatives and structured-credit markets, publishing a monthly newsletter, online daily news and a comprehensive database of collateralized debt obligations. The magazine uses comprehensive data analysis exclusively to determine its honorees, and the award is based purely on quantitative performance metrics. More than 300 CDOs were submitted for recognition this year. The magazine's inaugural awards were issued in September 2007.
"We are delighted to be named Best Cash CDO Manager for the second year in a row. It is a great honor and recognizes the hard work by the many skilled individuals within Babson Capital," said Thomas Finke, President of Babson Capital. "The recognition for our overall performance versus our peers speaks for the quality and consistency across our firm."
"It has been a difficult 12 months since the last awards," Creditflux noted in its August issue when nominees were announced. "New CDO issuance has plummeted ... But, as these finalists show, this has not prevented many managers [from] providing strong returns for their investors ... Asset managers are looking to the future, and are eager to show the world just how good their track record is."
The nominations for individual awards included the Duchess V CLO, nominated as Best European cash CLO - seasoned, and Duchess VI CLO, nominated as Best European cash CLO - recent, both managed by Babson Capital Europe, a subsidiary of Babson Capital based in London. The Babson CLO 2007-I, managed by the U.S. Bank Loan Team in Charlotte, N.C., was nominated as Best Cash CLO - recent.
For the Best Cash CDO Manager award, all deals that a firm had under management were compared with its peers. Through its CDO/CLO businesses in Springfield, Mass., and Charlotte and Babson Capital Europe, the firm manages more than $22 billion in 57 CDOs as of June 30, 2008.
Subscribe to:
Comments (Atom)