T-Zero, a post-trade processing platform for credit derivatives that is being spun out of credit derivatives trading platform Creditex, was launched as an independent entity late last week. Creditex and T-Zero will now be owned by a separate holding company.
“Achieving greater automated operational efficiencies is critical to the continued development and maturity of the global credit derivatives market,” says Sunil Hirani, CEO of the holding company that will own Creditex and T-Zero. “T-Zero is designed to dramatically accelerate the industry’s movement toward automation and will allow market participants to achieve trade-date messaging and connectivity at a fraction of the current time and cost.”
The ambition of T-Zero is to address the lack of standardized electronic messaging between market participants in the credit derivatives industry. It also aims to overcome the deficiency of system-to-system connectivity between counterparties, and help create standardized workflows.
T-Zero captures and routes trade details, assignments, allocations and other relevant trade details electronically. The company says this is critical for tri-party transactions like “assignments” or “novations” (transactions where trades are assigned by the buy-side to the sell-side) and “give-ups” (transactions where a prime broker acts as an intermediary between a sell-side and buy-side institution).
“Periodically, an innovation occurs that will be a critical factor in the development of that market,” says Simon Morris, head of European credit trading at Goldman Sachs. “T-Zero is one such innovation. It will provide much needed automation and operational control in a time when the rapid growth of the credit derivatives market is not just continuing, but accelerating. We are pleased to be involved with this important industry initiative.”
The T-Zero platform also aims to provide neutral connectivity between market participants, vendor systems, fund administrators, prime brokerage systems, dealer risk systems and the US CSD, the Depository Trust & Clearing Corporation (DTCC). The system will automatically allow counterparties to send affirmed trades to DTCC for same-day (T+0) legal execution.
Robert McGrail, Executive Managing Director of DTCC, says the CSD is pleased to be linking its service with T-Zero. “DTCC is continually collaborating with complementary service providers such as T-Zero to connect their front-office capabilities to Deriv/SERV’s real-time automated confirmation process efficiently,” he says.
Guy America, head of European credit trading at JP Morgan, says the launch of T-Zero comes at an “opportune time” because dealers, hedge funds, regulators and other market participants are seeking “technology solutions to address the delays in unsigned confirmations and assignments.”
“T-Zero complements our technology strategy perfectly,” says Hans Hufschmid, Chairman and CEO of GlobeOp Financial Services, the hedge fund administrator. “By providing T-Zero messaging and connectivity services to our hedge fund clients, there will be substantial benefits to credit derivatives trade processing.”
The launch of T-Zero comes on the heels of industry and regulatory calls for improving transaction processing as the industry has grown exponentially over the past few years. The FSA, Bank of England, Federal Reserve and ISDA have recently identified operational risks of derivatives and have called for automated solutions to address the problems.
Initially, T-Zero will handle single-name CDS trades and credit index trades. Additional products and further connectivity will be introduced over the course of the next year.