Markit and Creditex today announced the launch of an industry-wide portfolio compression platform for the credit derivative market with the first live runs completed successfully 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 27 August 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[1][1] contracts and a 49% gross notional reduction across all participating counterparties.
The first European live portfolio compression run was held on 4 September 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.
Michael Heaney, Head of US Credit Trading at Morgan Stanley, said: "The results from the inaugural portfolio compression runs in the US and Europe are reflective of the significant efforts market participants are making to improve credit derivative market infrastructure and strengthen the resiliency of the financial system. We welcome the initiative by Markit and Creditex."
Brian Archer, Global Head of Credit Trading at Citi, said: "This is a significant achievement for the credit derivative market and a core component of the broad efforts being undertaken by major market participants to reduce operational risks and costs."