Leading credit derivatives dealers have pledged to cut the backlog of unconfirmed trades littering back offices by 70% by the end of June, as part of a package of measures aimed at creating a largely-electronic marketplace.
The new target has been outlined by fourteen of the world's largest banks in a letter to the Federal Reserve Bank of New York. Market participants were asked by regulators to table fresh proposals after meeting an earlier target to cut trade confirmation backlogs by 30%.
The NY Fed welcomed the new commitments, even though the 70% promise relates to trades that are more than 30 days old and includes deals that were on the books back in September 2005.
The dealers have also committed to processing trades through an "industry-accepted" platform, the creation of an industry utility trade warehouse, to new processing standards for trades that cannot be confirmed electronically, and to a new procedure for settling contracts after a credit event, such as a default.
The US Depository Trust and Clearing Corporation earlier this month outlined plans to create a trade information warehouse with the full support of major dealers and buy-side participants.
In their letter to the NY Fed, dealing firms stress that it is not intended that DTCC will be an exclusive provider of electronic services for this market: "While substantial work is being undertaken with DTCC...the major dealers remain open to working with other service providers and are free to use any alternative electronic platform."
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