Risk Magazine Awarded Markit And Creditex For Improvements In CDS Infrastructure

Portfolio compression platform Markit Creditex designed to reduce the amount of notional outstanding in the CDS market, has won Risk Magazine's 'Industry Platform of the Year'award. The 2009 Risk Awards recognise those institutions that have continued to provide derivatives and

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Portfolio compression platform Markit/Creditex designed to reduce the amount of notional outstanding in the CDS market, has won Risk Magazine’s ‘Industry Platform of the Year’award.

The 2009 Risk Awards recognise those institutions that have continued to provide derivatives and risk management expertise to their customers in difficult market conditions. Panel judges and clients praised the role of the Markit/Creditex platform in reducing the amount of notional outstanding in the CDS market thus minimising the perceived systemic risk within this market.

Markit and Creditex were selected by the Operations Management Group in June 2008 to develop a trade compression platform focusing on single name CDS trades. To date, the platform has run 40 compression cycles and reduced notional volumes outstanding by $2.3 trillion. Reducing levels of outstanding trades via portfolio compression is one of the Federal Reserve Bank of New York’s priorities for addressing operational risk in the OTC derivative markets.

The Markit/Creditex trade compression platform went live in August 2008. It is the first platform of its kind to concentrate on single name CDS rather than index trades which have standardised coupons and are therefore easier to tear up. It also has the added advantage of leaving portfolio risk profiles unchanged. The platform operates multilaterally, tearing up trades across all submitted portfolios simultaneously.

“We worked to a very tight schedule and delivered the platform in two months,” says Kevin Gould, president, Markit, North America. “The most challenging part was to develop and test the algorithm and we put our best people on the project to get it done quickly.”

L.D.

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