Future trade confirmation backlogs in the credit derivatives market could be avoided with wider adoption of front-office trading software, Denarius, says Anvil, a front- and middle-office trading tools provider.
The credit derivatives industry is currently working together to improve the efficiency of trade processing in the light of a huge backlog of unconfirmed trades. In a recent letter to the Federal Reserve Bank of New York, fourteen of the world’s largest banks pledged to cut that backlog by 70% and committed to a raft of measures aimed at harmonising trade processing.
According to International Swaps & Derivatives Association (ISDA) figures, the notional principal outstanding volume of credit default swaps (CDS) grew 105% in 2005, to $17.3 trillion.
This is a huge problem, and back office initiatives are only part of the solution, said Anvil director and strategist Malcolm Clark. Tackling the way trades are handled in the front office would go a long way to improving the situation.
Malcolm adds that A clean and understandable trading book is the best place to start. A lot of organisations get into trouble because they are still tracking trades on spreadsheets or, in some scary instances, in traders heads.”