Four leading "buy-side" participants in the credit default swap market, including Primus Financial Products LLC, Moore Capital Management LLC and Citadel Investment Group, are the first buy-side firms to go live on The Depository Trust & Clearing Corporation's (DTCC) automated credit default swaps matching service.
Primus, an institutional portfolio manager of credit derivatives, went live in December 2003, while Moore Capital and Citadel, two of the world's most well-known hedge funds, went live this month. DTCC has already signed up most of the major players on the dealer side of the market, with 17 of the largest dealers worldwide subscribed.
"Our organization has worked very closely with others in our industry on this initiative, and we are very excited to go live on DTCC's system," said Ann Marie Dave, managing director, Global Operations for Citadel. "We look forward to the benefits this service will provide, not only for our organization, but for our industry as a whole."
"We have been using DTCC's service for more than two months now," said Hilmar Schaumann, chief trading and investment officer of Primus Financial Products. "Having been the first non-bank participant, I can say that it has functioned extremely well. The system has greatly increased the speed of the trade confirmation process with our counterparties."
"Having hedge funds as large and important as Citadel and Moore Capital, as well major institutional end-users like Primus involved in our service is a significant move for DTCC, and we are delighted to win their participation," said Peter Axilrod, managing director, DTCC New Business Development. "They are playing a leadership role in getting the end-user side of the business to automate the processing of confirming credit default swaps, and we expect their participation to lead to additional participation by many other buy-side firms in our service."
Citadel Investment Group is one of the largest hedge funds in the world, managing about $9 billion for a wide range of investors.
Moore Capital Management, headquartered in New York, along with an affiliate in London, manages several privately offered hedge funds.
Primus Financial Products, LLC, a subsidiary of Primus Guaranty, Ltd., is the only triple-A rated company dedicated to managing a credit derivatives portfolio. Primus Financial Products invests in credit risk and manages the risk via credit default swaps, corporates and sovereigns.
The credit default swap product is one of the fastest growing of the hundred-trillion-dollar over-the-counter derivatives market, doubling in size from 2000 to 2002 and projected to more than double in size again from 2002 to 2004, according to the most recent British Bankers Association survey. DTCC's new matching service brings, for the first time, real-time automation, standardization and greater certainty to this market. In addition to the credit defaults swaps matching service, DTCC has also introduced this year a payment reconciliation service that matches payments being made between trading parties and is the first step toward a netting system.