Creditex and Markit Launch Portfolio Compression Platform
Markit and Creditex has successfully completed their portfolio compression platform for the credit derivative market including its first live runs for single name credit default swaps (CDS) in the North American and European markets.
The first North American live portfolio compression run, which took place on August 27 with the participation of 14 credit derivative dealers, was conducted for CDS contracts referencing several widely traded North American telecommunications companies. It achieved a 56% gross notional reduction of compressible contracts and a 49% gross notional reduction across all participating counterparties. The first European live portfolio compression run was held on September 4 with the participation of 15 credit derivative dealers. The service was run on CDS contracts referencing several widely traded European telecommunications companies, and achieved a 53% gross notional reduction of compressible contracts and a 46% gross notional reduction across all participating counterparties.
Markit and Creditex were selected by the International Swaps and Derivatives Association (ISDA) to provide infrastructure to support commitments made by major market participants to the Federal Reserve Bank of New York relating to improved operational efficiency and risk reduction.The new portfolio compression methodology designed by Markit and Creditex is unique in that it reduces operational risk while leaving market risk profiles unchanged. This is achieved by terminating existing trades and replacing them with a smaller number of new replacement trades that carry the same risk profile and cash flows as the initial portfolio but have less capital exposure.
The portfolio compression process will be run on a regular basis to compress the most actively traded single name CDS contracts systematically across all major sectors. This will reduce the total gross notional outstanding of CDS contracts in the $62 trillion market to a significantly smaller net amount.
Publish Date: Sep 08, 2008
Source URL: http://www.wallstreetandtech.com/showArticle.jhtml?articleID=210600161
Tuesday, September 09, 2008
Misys Expands Asset Class Coverage, Improves Risk Management of Derivatives Trading Platform
Misys today is rolling out the latest version of its derivatives trading platform, Misys Summit FT Version 5.3. The new version has new and upgraded modules for equities trading, structured bonds and compliance monitoring.
The result, according to Misys, is deeper integration and improved visibility, including a new market risk limit monitoring dashboard with breach alerts.
Specific new offerings within Misys Summit FT V5.3 include:
A new end to end solution for cash & equity derivatives - Misys has created a new equities platform to provide extended coverage for trading and effectively managing equity cash and equity derivatives. Front to back coverage includes pre-deal checks, real-time positions, portfolio management, pricing, risk analysis, confirmation, settlements, corporate actions, valuation and accounting.
A new module for structured bonds " As many banks are issuing structured bonds to raise funding in a flooded market, there is a need to fully support structured bonds including structuring, issuing, investing, position-keeping, hedging, swapping, credit, and auditing. The new structured bonds module leverages Misys Summit MUST's technology and has been developed in cooperation with KfW, the German banking group, to enable the processing of structured bonds in the same manner as any standard bond. The new module provides enhanced position management, call processing, capital gains, yield calculations, accounting and theoretical valuation.
Market risk limits - To help with the volatility, high volumes and huge risks associated with today's financial markets, Version 5.3 includes a new market risk limits monitoring solution with limit breach notifications and dashboards covering P&L, portfolio or trade sensitivity to risk factors, trader daily volume and many more. Instant notifications through emails, SMS and desktop alerts get information to the right people at the right time, providing an environment of protection and regulatory compliance.
Publish Date:Sep 08, 2008
Friday, September 05, 2008
TABB Group Forecasts Monthly Novation of Credit Default Swap (CDS)
Eighteen years after the credit default swap (CDS) was created to help firms hedge against the risk of default of a given asset, TABB Group estimates that the average notional value at risk (the total value of a leveraged position's assets) of trades novated monthly will exceed $45.2 trillion by 2010, an 88% CAGR (compound average growth rate) from 2005.
Kevin McPartland, senior analyst and author of the new TABB Group research report "Credit Default Swaps: The Risk of Inefficient Markets," said in a press release that 90% of all CDS trades are confirmed electronically, but same-day matching of new trades and novations is rare and error rates are unacceptably high. "This is a lot of money to risk on a phone call," he added. TABB Group forecasts that nearly $170 million will be spent in 2010 by major sell-side broker-dealers to automate the affirmation process and mitigate the potential risk resulting from trade exceptions.
Despite current available technology, details of most CDS trades are still not affirmed between counterparties on trade date. The delay is not in legally confirming or settling trades, but simply in agreeing that each party recorded the same basic trade details such as the reference entity or notional amount. Where overnight batch jobs were once accepted solutions, with 2008 trading volumes and market volatility levels, explains McPartland in the release, "the risk created by not understanding your market and counterparty exposure until the next morning makes this standard practice rather unacceptable."
Publish Date: Sepember 04, 2008
Source URL: http://www.wallstreetandtech.com/showArticle.jhtml?articleID=210300535
Eighteen years after the credit default swap (CDS) was created to help firms hedge against the risk of default of a given asset, TABB Group estimates that the average notional value at risk (the total value of a leveraged position's assets) of trades novated monthly will exceed $45.2 trillion by 2010, an 88% CAGR (compound average growth rate) from 2005.
Kevin McPartland, senior analyst and author of the new TABB Group research report "Credit Default Swaps: The Risk of Inefficient Markets," said in a press release that 90% of all CDS trades are confirmed electronically, but same-day matching of new trades and novations is rare and error rates are unacceptably high. "This is a lot of money to risk on a phone call," he added. TABB Group forecasts that nearly $170 million will be spent in 2010 by major sell-side broker-dealers to automate the affirmation process and mitigate the potential risk resulting from trade exceptions.
Despite current available technology, details of most CDS trades are still not affirmed between counterparties on trade date. The delay is not in legally confirming or settling trades, but simply in agreeing that each party recorded the same basic trade details such as the reference entity or notional amount. Where overnight batch jobs were once accepted solutions, with 2008 trading volumes and market volatility levels, explains McPartland in the release, "the risk created by not understanding your market and counterparty exposure until the next morning makes this standard practice rather unacceptable."
Publish Date: Sepember 04, 2008
Source URL: http://www.wallstreetandtech.com/showArticle.jhtml?articleID=210300535
China Development Industrial Bank Outsources Trading Desk to Derivatives.com
Taipei-based China Development Industrial Bank (CDIB) has rolled out Imagine Software's Derivatives.com ASP-based solution to power the bank's new multi-strategy, global macro trading desk.
"The first and most immediate necessity for our new desk was an integrated multi-asset solution that could provide real-time front-office, middle-office, and risk management functions," stated Bertrand Hongre, head of macro trading at CDIB, one of Taiwan's largest and leading venture capital and investment banking institutions.
Among the factors that weighed on its vendor selection — including industry-leading functionality, fast deployment and implementation capabilities — were cost efficiencies and economies of scale. "We think an ASP-based solution is infinitely preferable to a traditional software implementation. Not only is Imagine's Derivatives.com inherently easy to deploy, but because it's a completely outsourced solution, the bank avoids incurring the customary internal IT and data management support requirements," said Hongre.
CDIB plans to spin the desk off into a standalone fund in years to come, so a portable ASP-based solution outsourced from CDIB's internal infrastructure is suited for that purpose, added Hongre. In addition, Hongre said that Imagine could become a future alternative to CDIB's existing systems for fixed income, credit and commodities businesses, and it looks forward to expanding its usage of the real-time portfolio and risk management product.
Publish Date: September 02, 2008
Source URL: http://www.wallstreetandtech.com/showArticle.jhtml?articleID=210300092
Taipei-based China Development Industrial Bank (CDIB) has rolled out Imagine Software's Derivatives.com ASP-based solution to power the bank's new multi-strategy, global macro trading desk.
"The first and most immediate necessity for our new desk was an integrated multi-asset solution that could provide real-time front-office, middle-office, and risk management functions," stated Bertrand Hongre, head of macro trading at CDIB, one of Taiwan's largest and leading venture capital and investment banking institutions.
Among the factors that weighed on its vendor selection — including industry-leading functionality, fast deployment and implementation capabilities — were cost efficiencies and economies of scale. "We think an ASP-based solution is infinitely preferable to a traditional software implementation. Not only is Imagine's Derivatives.com inherently easy to deploy, but because it's a completely outsourced solution, the bank avoids incurring the customary internal IT and data management support requirements," said Hongre.
CDIB plans to spin the desk off into a standalone fund in years to come, so a portable ASP-based solution outsourced from CDIB's internal infrastructure is suited for that purpose, added Hongre. In addition, Hongre said that Imagine could become a future alternative to CDIB's existing systems for fixed income, credit and commodities businesses, and it looks forward to expanding its usage of the real-time portfolio and risk management product.
Publish Date: September 02, 2008
Source URL: http://www.wallstreetandtech.com/showArticle.jhtml?articleID=210300092
Thursday, August 21, 2008
State Street Launches Industry Leading Over-the-Counter Derivatives Servicing Platform
The OTC Hub is a global, end-to-end servicing solution that automates a number of stages in derivatives processing including customer reporting, electronic trade flow and the reconciliation of positions and cash flows between the middle and back offices. The State Street platform will now reconcile data from the industry utilities and dealers to customer trade details and automates acquisition of vendor prices. The platform is flexible to allow for enhanced services and capabilities as the derivatives market evolves and industry technologies mature.
“This cutting-edge technology provides an excellent opportunity to automate what has been a manually driven and complex part of our investment servicing operations,” said Richard Tyson, executive vice president of PIMCO. “Throughout our long partnership, State Street has consistently delivered advanced technological solutions for the challenges that come with a changing marketplace.”
State Street’s new platform, The OTC Hub, automates the processing of OTC derivatives, one of the fastest growing asset classes. Since 1999, the volume of derivatives contracts has surpassed an estimated US$600 trillion, 83 percent of which has originated in the over-the-counter (OTC) market.
“The use of over-the-counter derivatives is growing rapidly and this new scalable solution will enable us to handle both the increasing volume and complexity of these transactions,” said Joe Antonellis, vice chairman of State Street. “We are pleased to offer PIMCO, a world leader in fixed-income asset management, and our customers globally a seamless solution for their derivatives.”
State Street’s enhanced platform fully supports Financial products Markup Language (FpML), a key component to servicing derivatives, and provides rich validation rules to ISDA FpML standards. Its strong price validation functionality includes both internal and customer model calculations for comparison. Additionally, the OTC Hub also provides greater depth of trade details and economics, which allows enhanced research and issue resolution.
State Street’s customers will benefit from having all aspects of their derivatives transactions automated with online access to detailed information such as resets and settlements, valuations, exposure and other risk information. These capabilities will be available via State Street’s industry leading portal, my.statestreet.com.
“The interactive-views function enables customers to easily and efficiently navigate the complexity of their derivative transactions and drill down, graph, customize and export data in a variety of ways,” said Neil Wright, senior vice president and product manager for derivatives at State Street. “Information from the OTC Hub delivered via my.statestreet.com is customized for specific customer roles, easing the implementation and adoption of State Street’s derivatives processing capabilities.”
Further demonstrating its experience in the derivatives space, State Street will launch its next Vision Series report on the topic of derivatives in late September 2008.
About State Street
State Street Corporation (NYSE: STT - News) is the world's leading provider of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $15.3 trillion in assets under custody and $1.9 trillion in assets under management at June 30, 2008, State Street operates in 26 countries and more than 100 geographic markets worldwide. For more information, visit State Street’s website at www.statestreet.com.
About PIMCO
PIMCO, founded in 1971, is a global investment management firm serving a wide range of institutional and retail investors worldwide. With offices in nine countries in North America, Europe and Asia, we manage investments across a broad spectrum of global financial markets. Our success is built on our philosophy of seeking to consistently deliver attractive return opportunities while maintaining a strong culture of risk management. PIMCO is owned by Allianz Global Investors, a subsidiary of the Munich-based Allianz Group, among the leading global insurance companies.
Source:Businesswire
Publish Date: August 21, 2008
Monday, August 11, 2008
Sapient Buys Derivatives Consulting Group
Boston-based IT consulting firm Sapient has acquired London-based Derivatives Consulting Group Limited, a provider of derivatives consulting and outsourcing services to investment banks, hedge funds, asset managers and commercial banking clients, including derivative operations metrics, the result of benchmark surveys of buy-side and sell-side firms.
DCG will become part of Sapient's Trading and Risk Management practice. It will add operations benchmarking, derivatives and process expertise, operations support, technology services and off-shore capabilities to the group.
"Today's volatile markets and increasingly strict regulatory environments make this an opportune time to add DCG's capabilities to our TRM practice," said Sapient president and chief executive officer Alan Herrick.'"Regulatory scrutiny has resulted in new demands on clients to maintain compliance and reduce the risk associated with the growing complexity and volumes of these transactions."
Sapient's acquisition of DCG is supported by a number of trends: The worldwide derivatives market reached $677 trillion notional in 2007 and continues to grow dramatically, according to Celent.'While derivatives volumes have grown, there has been a lag in operations infrastructure investments. This has created greater demand for operations support and technology.'At the same time, government agencies such as the U.S. Federal Reserve and the U.K. Financial Services Authority have increased the regulation and scrutiny of derivatives transactions, further compounding the existing operational challenges.
Source URL: http://www.wallstreetandtech.com/showArticle.jhtml;jsessionid=Q0I4OGW5AJGR4QSNDLRSKHSCJUNN2JVN?articleID=210000320
Publish Date: August 08, 2008
Boston-based IT consulting firm Sapient has acquired London-based Derivatives Consulting Group Limited, a provider of derivatives consulting and outsourcing services to investment banks, hedge funds, asset managers and commercial banking clients, including derivative operations metrics, the result of benchmark surveys of buy-side and sell-side firms.
DCG will become part of Sapient's Trading and Risk Management practice. It will add operations benchmarking, derivatives and process expertise, operations support, technology services and off-shore capabilities to the group.
"Today's volatile markets and increasingly strict regulatory environments make this an opportune time to add DCG's capabilities to our TRM practice," said Sapient president and chief executive officer Alan Herrick.'"Regulatory scrutiny has resulted in new demands on clients to maintain compliance and reduce the risk associated with the growing complexity and volumes of these transactions."
Sapient's acquisition of DCG is supported by a number of trends: The worldwide derivatives market reached $677 trillion notional in 2007 and continues to grow dramatically, according to Celent.'While derivatives volumes have grown, there has been a lag in operations infrastructure investments. This has created greater demand for operations support and technology.'At the same time, government agencies such as the U.S. Federal Reserve and the U.K. Financial Services Authority have increased the regulation and scrutiny of derivatives transactions, further compounding the existing operational challenges.
Source URL: http://www.wallstreetandtech.com/showArticle.jhtml;jsessionid=Q0I4OGW5AJGR4QSNDLRSKHSCJUNN2JVN?articleID=210000320
Publish Date: August 08, 2008
Monday, August 04, 2008
Julius Finance Announces Credit Derivatives Valuation Service
Service to use model fusion to determine what synthetic credit derivatives are worth.
The same week Merrill Lynch announced a $5.7 billion write-down on collateralized debt obligations, Julius Finance, a provider of analytics engines and services for evaluating credit derivatives, has launched a new valuation service for estimating the value and risk of such products.
The new service will price bespoke synthetic credit derivative obligations, CDO squared, CDO cubed, constant proportion portfolio insurance, constant proportion debt obligations and credit default swaps. The valuation service makes use of Julius Finance's research in model fusion, which prices such securities by taking account of all market available information through a unified credit model.
The service is designed to assist with bespoke valuation, risk management, catastrophic risk analysis, portfolio management, scenario analysis, structured/hybrid products and trading. It's meant to be used by credit traders, credit risk managers, auditors, legal professionals and controllers.
Julius also provides market driven tail risk estimates for credit default swap and corporate bond portfolio managers, and unique insights into monoline companies such as credit derivative product companies.
Source URL: http://www.wallstreetandtech.com/showArticle.jhtml?articleID=209901408
Publish Date: Aug 01, 2008
Service to use model fusion to determine what synthetic credit derivatives are worth.
The same week Merrill Lynch announced a $5.7 billion write-down on collateralized debt obligations, Julius Finance, a provider of analytics engines and services for evaluating credit derivatives, has launched a new valuation service for estimating the value and risk of such products.
The new service will price bespoke synthetic credit derivative obligations, CDO squared, CDO cubed, constant proportion portfolio insurance, constant proportion debt obligations and credit default swaps. The valuation service makes use of Julius Finance's research in model fusion, which prices such securities by taking account of all market available information through a unified credit model.
The service is designed to assist with bespoke valuation, risk management, catastrophic risk analysis, portfolio management, scenario analysis, structured/hybrid products and trading. It's meant to be used by credit traders, credit risk managers, auditors, legal professionals and controllers.
Julius also provides market driven tail risk estimates for credit default swap and corporate bond portfolio managers, and unique insights into monoline companies such as credit derivative product companies.
Source URL: http://www.wallstreetandtech.com/showArticle.jhtml?articleID=209901408
Publish Date: Aug 01, 2008
Subscribe to:
Posts (Atom)