New Automated Data Feed Between Omgeo’s Crosscheck and DTCC

Omgeo announced the availability of an automated data feed between Omgeo CrossCheck and DTCC's Trade Information Warehouse.

The link is designed to reduce operational risks in the over-the-counter (OTC) credit derivatives market by enabling market participants to align their portfolios with contract records maintained by the Warehouse, a service offering of DTCC's Deriv/SERV unit.

According to a release, Warehouse is the market's first trade database and centralized electronic infrastructure for post-trade processing of OTC derivatives contracts over their lifecycles, from confirmation through to final settlement.

Omgeo CrossCheck is a centrally hosted, exception management solution that automates the comparison of portfolios of derivatives between counterparties.

It helps minimize the risks and consequences of unaligned portfolios in advance of payments, collateral calls, credit events and other situations, according to Omgeo.

As such, firms are better able to scale their business as volumes expand, while effectively managing risk in times of market stress, allowing for high levels of transparency and efficiency, the company said in the release.

The new link enables Omgeo clients that are also customers of DTCC's Deriv/SERV and the Trade Information Warehouse to receive an automatic feed of relevant credit derivative trade data from the Warehouse to CrossCheck. With this feed in place, clients can compare their portfolio records against the Warehouse to ensure agreement with the "golden copy" of trade details for positions with all counterparties who use Deriv/SERV. "Since the debut of Omgeo's counterparty risk management offerings, and specifically our portfolio reconciliation service Omgeo CrossCheck, we've been dedicated to ensuring that the data involved is of the utmost quality," said Steve Matthews, managing director, product at Omgeo. "By linking CrossCheck to the global standard for centralized and secure data for OTC derivatives at DTCC's Trade Information Warehouse, our clients can be assured that their risks are further mitigated throughout the length of their derivatives contracts."

Source URL: http://www.wallstreetandtech.com/showArticle.jhtml?articleID=216401750

Markit Launches CDS Data Portal

Markit, a financial information services company, today announced the launch of a credit default swap information portal designed to increase transparency and provide a broader audience with a tool to monitor the market.

The new data portal will make a wide range of Markit's independent CDS data sets publicly available, including: prices for Markit's family of CDS indices, the Markit CDX and Markit iTraxx; the last quote received by Markit before New York close of trading for approximately 450 of the most liquid CDS contracts, including G20 sovereigns, large financial corporations and constituents of Markit's iTraxx and CDX indices; the biggest daily single name CDS movers for North America, Europe and Asia; and daily Markit/ICE TrustTM CDS settlement prices for the most liquid Markit CDX index contracts listed for clearing by ICE Trust.

In support of the industry's migration to a standardized CDS contract and quoting convention, Markit has published a free online calculator that converts CDS spreads into the new upfront quoting convention. Markit will also publish educational material to encourage greater understanding of the CDS market.

"The CDS market is viewed as the barometer of health for the broad credit markets," said Armins Rusis, global co-head of fixed income at Markit. "It is therefore important to make information about this market as widely available as possible. Markit remains committed to increasing transparency in the CDS market and we will continue to work with the industry to help it adapt to a changing environment."

Source URL: http://www.wallstreetandtech.com/showArticle.jhtml?articleID=216000013

SuperDerivatives Upgrades VolSurface Service as Mark-to-Market Data

SuperDerivatives upgraded its VolSurface service as Mark-to-Market Data, enabling cost-effective and self-service derivatives revaluation and risk management.

The company said improvements to the service are based on feedback from over 400 customers around the world, which revealed serious concerns about relying on in-house market data or data from counterparties and other non-independent sources and a need for data that truly reflects the current OTC market.

SD's Mark-to-Market Data is designed to help banks, funds and corporations who wish to manage risk in their portfolio but also control the costs for accessing the best available derivatives market data to inform their decisions and reporting, SuperDerivatives said in a release.

The service provides independent risk reference data for vanilla and advanced derivatives across commodities, energy, equities, FX and interest rates, and can be used as a customizable data feed for risk management systems, replacing makeshift and often inaccurate methods such as capturing data in a spreadsheet, SD said.

The service combines SD's benchmark pricing methodology with market rates collected from a selection of active market participants, delivering an automated and validated volatility feed for a range of both liquid and illiquid markets.

In addition to volatility surfaces, the upgraded service now also offers intraday or end-of-day automated feeds for yield curves, forwards curves, overnight index swaps (OIS) curves, inflation curves, correlations and equity dividend flows.

"The key to derivatives valuation is the quality, accuracy and reliability of data across asset classes and markets which has to be delivered electronically as close to real time as possible in order to allow distribution tools to be automated, and to enable generation of end-of-day reports," Dani Weigert, Mark-to-Market Product Manager, SD said in a release. "Our Mark-to-Market Data service now boasts the widest asset coverage and the most extensive selection of market-accurate risk data, making it a fully-fledged industrial-strength solution for cost-effective risk management."

Source URL: http://www.wallstreetandtech.com/showArticle.jhtml?articleID=215801619

Despite Misconceptions, Credit Default Swap Market is Growing

Pre-dating Wall Street's current financial crisis, the credit default swaps market generated heated debate and discussion, moving from an initial focus on confirmation backlogs to a central counterparty clearing model and more recently to the possibility of requiring these products to trade on an exchange. Unfortunately, misconceptions regarding the utility and purpose of credit default swaps continue to spread and the financial industry's efforts to defend these instruments have been met with disdain by legislators seeking oversight of the CDS industry through misguided regulatory efforts.

But according to Kevin McPartland, senior analyst at Tabb Group and author of the new research report, "Credit Default Swaps: Industry Projections," although the outstanding notional value of the CDS market has declined dramatically largely due to trade compression, CDS market revenues from central clearing, electronic trading and existing trade migration will grow to $174 million, growing at 12% CAGR (compound annual growth rate) through 2011.

A new regulatory structure including central clearing and increased electronic trading, says McPartland, will streamline the market, lower barriers to entry for buy-side firms and ultimately increase volumes. "However, beyond the ubiquitous counterparty risk issue, concerns over operational efficiency issues continue to plague the CDS market at the same time that global regulators are pushing the industry to adopt central clearing for CDS trades and increase market transparency."

He explains how four proposed major initiatives from CME/Citadel, NYSE Euronext, Eurex and ICE (which includes Creditex and TCC), each vying to be the central counterparty of choice for the CDS market, will allow trades into their clearing houses from nearly any execution platform, including those operated by their competition. He does caution, however, that even when the first central clearing entity come online, a number of challenges will remain that require further thought and innovation.

Despite strong backing by regulators, he says that there are some in the industry who believe the problems with a central clearing solution for the CDS markets go deeper. "At least one alternative approach, NetDelta, a wholly-owned subsidiary of Knight Trading, currently exists, and others are likely in the works."

Casting an eye to the future, he also identifies three issues worth tracking: CDS market transparency; mandates; and electronic trading

Source URL: http://www.wallstreetandtech.com/showArticle.jhtml?articleID=215800447

Managing Risk Key for OTC Derivatives

Risk management and post-trade administration is critical for the growing over-the-counter derivatives market, according to State Street Corporation, which in August launched an OTC derivatives servicing platform.

“It is crucial that the sellside community, the financial services industry and regulators work together to develop new approaches to processing and servicing these complex transactions,” said Jay Hooley, president and chief operating officer of State Street.

The world's largest money manager for institutions on Monday released its sixth in a series of Vision Reports. The latest report on derivatives servicing says volume of OTC trades may present a challenge for legacy technology systems, which were originally designed to process traditional equity and fixed-rate transactions, but are now handling non-traditional trades as well.

A January study by Calypso Technology, a global provider of an integrated trading application suite to the capital markets industry, found that 61 percent of respondents were concerned about improving their internal systems for risk management, and 49 percent were working to improve OTC derivatives processing.

Last month, the U.S. House Agriculture Committee introduced the Derivatives Markets Transparency and Accountability Act of 2009, which would require that virtually all OTC derivatives be either be settled and cleared through a derivatives clearing organization (DCO) regulated by the Commodity Futures Trading Commission, a clearing organization regulated by the Securities Exchange Commission, a regulated foreign clearing organization, or reported to the CFTC.

Neil Wright, senior vice president and product manager for derivatives servicing at State Street, said: “With increasing volumes and complexity, the range of procedures to confirm, process and otherwise manage the trade life-cycle of OTC derivatives needs to be automated. In addition, providers will need to keep pace with the increasingly sophisticated analytics needed for derivatives trades.”

State Street OTC Hub is currently in production with PIMCO, the world's largest manager of bond funds and long-time State Street customer.

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