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JPMorgan sacrifices CDS engine to open source in bid to stave off legislation

30 January 2009  |  13198 views  |  0 JPMorgan Chase logo web screenshot

JPMorgan is to hand over its inhouse-developed CDS analytical engine to the International Swaps and Derivatives Association to run as an open platform in an effort to increase transparency in credit default swaps pricing and stave off legislation.

The CDS analytical engine, originally developed by the Quantitative Research group at JPMorgan, is widely used in the industry to price CDS contracts.

Isda says it will make the technology available as open source code, thereby increasing transparency around CDS pricing.

Robert Pickel, executive director and chief executive officer, Isda, describes the initiative as another measure of the industry's efforts to raise transparency and increase standardisation in CDS trading.

"JPMorgan has invested a lot of intellectual capital in this analytical engine," he says. "Its willingness to assign this to Isda for us to make it available as open source to the entire industry demonstrates our collective commitment to the integrity of the CDS product."

The move comes as Isda fights a draft US bill proposed by congressman Collin Peterson that would ban most forms of CDS trading.

"This bill would increase the cost and reduce the availability of essential risk management tools while failing to address the true causes of the credit crisis," says Eraj Shirvani, Isda chairman and head of European and Pacific credit sales and trading at Credit Suisse.

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