Bloomberg executives today announced that J.P. Morgan electronically executed and cleared credit default swap (CDS) and interest-rate swap (IRS) trades on Bloomberg's Fixed Income Electronic Trading platform (FIT). Listed equity option trades were also executed on Bloomberg's Execution Management system (EMSX).
The trades demonstrate that Bloomberg's Fixed Income business is preparing to meet the broadly defined requirements of the Dodd-Frank Act, which calls for increased transparency and market efficiency in over-the-counter (OTC) derivatives trading. Bloomberg intends to register with the U.S. Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC) as a Swap Execution Facility (SEF) and Security Based Swap Execution Facility (SBSEF), respectively.
Leveraging J.P. Morgan's function (JPTE ) on the Bloomberg Professional® service, the first CDS single-dealer trading page on the service, the credit indices were executed and submitted to ICE Trust (ICE) for clearing while the IRS trade was executed and submitted to LCH.Clearnet Ltd's SwapClear service (LCH.Clearnet) through the J.P. Morgan (JPSX ) page on the Bloomberg IRS Single-Dealer page (IFIT). Also executed on JPTE were trades intermediated through J.P. Morgan's Prime Brokerage.
Ben Macdonald, global head of Bloomberg's Fixed Income business, said, "These trades represent the next generation of electronic trading and clearing. Today's execution, our ability to handle large volumes, and our VCON voice affirmation platform, demonstrate Bloomberg's ability to provide clients with any option they need." Macdonald added, "Having all of your fixed income tools in one single, integrated system is convenient and helps eliminate opportunities for risk."
"We found that Bloomberg's FIT platform is an excellent way for us to execute and clear credit index trades," said Rob Milam, co-head of North American Credit Trading at J.P. Morgan. "We've been at the forefront of electronic trading since we first offered CDS single dealer trading via JPTE in 2009."
Among the clients participating in the trades were: BlueMountain Capital Management, Claren Road Asset Management, Diamond Notch Asset Management, Gracie Credit Opportunities Fund and PAMLI Capital Management LLC.
Greg Pearson, Gracie Credit Opportunities Fund Chief Financial Officer said, "With the changing OTC landscape, easily navigating the new work-flow is of utmost importance to our stakeholders. Gracie Credit is working with Bloomberg and J.P. Morgan because they are market leaders in fixed income electronic trading, which we find to be an important emerging platform for executing our investment strategy."
Earlier this month, Bloomberg's FIT completed more than $1 trillion in electronically traded IRS and CDS for 2011, making it the market leader. Bloomberg clients have leveraged direct connectivity to CME Clearing, ICE, the International Derivatives Clearing Group (IDCG) and LCH.Clearnet for voice-executed transactions since 2009. Also, Bloomberg now has 23 liquidity providers active for IRS trading, and 11 dealers live for CDS trading.