The Depository Trust & Clearing Corporation has revealed that nine of the largest dealers in credit default swaps worldwide are now using the automated trade confirmation service developed by DTCC to confirm trades.
DTCC boasted that its service, which is being used globally by market participants, was the first to automate the confirmation of credit default swaps, and said virtually all standard credit default swap transactions can be accommodated by the service.
Among the nine dealers now live on the service are: Bear Stearns, BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and UBS. Thirteen global dealers have signed up to use the credit default matching service developed by DTCC, and the remaining four firms are scheduled to go into live production in the very near future.
“It is unusual for a new service to obtain, at launch, the participation of dealers having such a large percentage of the trading volume,” said Sal Naro, global head of credit trading for UBS. “It speaks well for the community’s ability to mobilize in order to address industry needs.”
Andy Brindle, managing director, JPMorgan Chase, added that they “are planning to submit all eligible credit default swap trades with other participants to DTCC’s service for automated confirmation.”
“Having a single, centralized trade confirmation utility used by a critical mass of dealers, including virtually all of the very largest dealers, will be of great benefit to us,” said Jonathan Dorfman, managing director, Morgan Stanley. “It will be a major factor in facilitating the growth of this market.”
DTCC’s service is integrated with Mark-It Partners’ reference entity data (RED) service and supports the use of such data in the trade confirmation process. Lance Uggla, CEO of Mark-It Partners, said that the speed and take-up by the dealing community in the DTCC service was unexpectedly quick and an indication of the need. “The whole process was completed in a matter of months, and I expect the number of users to rise very quickly,” he added.
Janet Wynn, managing director and general manager for DTCC’s OTC Derivatives business area, said that DTCC is embarking on an ambitious agenda in 2004, including the capability to do assignments and partial terminations as its first major enhancement to the credit default swaps matching service. “The timing is expected to be shortly after the initial use of the service by the bulk of the major buy-side firms, who do most of the assigning,” Wynn said. “In early 2004, DTCC will be announcing plans to expand confirmation services to additional OTC derivative products and provision of new services for our entire community.”
The credit default swap product is one of the fastest growing of the hundred trillion dollar over-the-counter derivatives market, doubling in size from 2000 to 2002 and projected to more than double in size again from 2002 to 2004, according to a recent British Bankers Association survey.