The Depository Trust & Clearing Corporation (DTCC) has signed up three of the biggest dealers in the credit derivatives market for the launch of a new global, automated matching service for credit default swaps planned in June.
JPMorgan Chase, Deutsche Bank and Morgan Stanley have already signed on to use DTCC's automated matching service.
According to the most recent British Bankers Association survey, the credit default swap market doubled in size from 2000 to 2002 and is projected to more than double in size again from 2002 to 2004.
Mark Beeston, COO of integrated credit trading, Deutsche Bank says the move from a paper based to an automated process should increase the speed of confirmation, and lower operational risk and trade processing costs.
DTCC's new matching service was developed in consultation with a steering committee made up of industry experts from dealer firms.
A number of other organisations that deal in credit default swaps globally are reviewing subscription agreements and are expected to sign before the service goes live, says the DTCC.
Robert McGrail, managing director, new business ventures for DTCC, comments: "Any time you get three organisations with this level of market presence to commit to a brand new service, you know you have something that will change the industry."
Andy Brindle, managing director, JPMorgan Chase, says the DTCC's ability to leverage existing infrastructure was key to his firm's assent. "By confirming our credit default swaps through DTCC, we automatically get the full capabilities of DTCC in terms of capacity, reliability, controls, security and audit trails," he says.
The DTCC says it intends to add automated confirmation of over-the-counter index and equity options this year and is looking at adding additional OTC derivative services in the future.
"If there is market interest for us to expand to handle other OTC derivatives, we would certainly consider doing that," says Peter Axilrod, managing director, business development for DTCC.