Deutsche Bank, Goldman Sachs and JPMorgan have entered into exclusive talks to provide Mark-it Partners with their combined Reference Entity Database (RED) of nearly 2000 names traded in the credit derivatives market.
The three investment banks say they aim to make the database available to the broad market within the first half of the year. The banks launched RED to a limited audience six months ago and believe that handing over the service to an independent entity will make it more palatable as a reference source for the broader market.
RED data precisely matches the reference entity (RE) with its associated benchmark bond, or reference obligation (RO), and thus provides a potential mechanism for resolving counterparty disputes. The system is seen as compatible with Mark-It Partners daily credit derivatives pricing service, launched in association with 11 investment banks earlier this month.
Pricing of the RED service has been a key concern says Derek Smith, managing director and head of credit derivatives trading at Goldman Sachs. "It's all about economy of scale," he says. "RED is now truly useful in size – more importantly, we can price it cheaply enough to ensure its status as a market standard."