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Olesky: “Addressing the |
New services could help solve operational risk issues in credit derivatives
MarketAxess and TradeWeb both announced long anticipated credit default swap indices trading platforms in May. Given the current volatility and dislocation in the CDS indices sector, the timing could not be better.
Both the US Federal Reserve Board and the UK’s FSA have sounded the alarm in recent weeks over the boom of credit derivatives activity. Although most fixed income
specialists have spent the past three weeks speculating how much dealers have lost on OTC traded CDS, it is operational risks that the watchdogs have most voiced their
concern on, not credit risk. In light of this, both MarketAxess and TradeWeb are marketing their products as key to solving these operational exposures.
“We believe the development of our CDS index trading platform will be a significant milestone for the credit industry, bringing important operational efficiencies and ease of execution to both dealers and institutional investors,” says Richard McVey, CEO at MarketAxess.
In a similar vein: “TradeWeb is addressing the need for efficiency across the whole trade cycle in the OTC derivatives market,” says Lee Olesky, president of Thomson TradeWeb.
The hectic pace of growth of business conducted through the CDX and iTraxx indices have raised significant operational issues. Electronic trading should remove the danger of trades going unconfirmed for days.
Automated processing
TradeWeb CDS will use its proprietary straight-through processing network, TradeXpress. MarketAxess is planning to integrate its front-end trading system with the Depository Trust & Clearing Corporation’s subsidiary, Deriv/Serv, which is a provider of automated trade processing for various OTC markets.
MarketAxess has 11 dealers on board: ABN Amro, Banc of America, Bear Stearns, BNP Paribas, CSFB, DrKW, Goldman Sachs, JP Morgan, Merrill Lynch, RBS and UBS. TradeWeb has teamed up with JP Morgan and Goldman from the above list, and the Thomson-owned firm has also managed to get Morgan Stanley on board.
The absence of Deutsche Bank, one of the largest players in credit derivatives, is especially of note and other absentees include Barclays Capital and SG.
