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Tradeweb Touts New CDS Index Trading Capabilities
November 10, 2008
Tradeweb announced Nov. 7 that it has added a new trading protocol to its platform for U.S. credit default swap (CDS) indexes, which it says lets clients view real-time composite prices and more efficiently execute and process trades. In January, the functionality will be available for European indexes.
Jersey City, N.J.-based Tradeweb has introduced a request-for-market (RFM) trading format that allows customers to negotiate interactively with a single dealer. “It’s a live, two-sided market,” explained Tradeweb CEO Lee Olesky. RFM will be provided alongside Tradeweb’s traditional request-for-quote (RFQ) protocol--offered for CDS trading since 2005--which enables clients to request prices from up to four dealers simultaneously.
“When you’re going to one dealer, you probably care more about keeping the information limited to one bank,” said Olesky. Clients that use the RFQ format, on the other hand, are more interested in encouraging competition between dealers. Offering both satisfies “different objectives a buy-side trader might have,” he added.
The initiative, says Tradeweb, supports regulators’ goals--reducing counterparty risk and improving price transparency. “There are events that are catalysts, which focus the market participants,” said Olesky. “We see the electronic trading of most products as inevitable. It’s just a question of when. In this case we think there’s clearly an opportunity to satisfy existing demand for an electronic marketplace.”
“Tradeweb has successfully introduced greater transparency and efficiency to the fixed-income and derivatives markets over the past decade,” said Vic Simone, Tradeweb chairman and managing director of Goldman Sachs, in a statement. “It makes sense that they are leading the way in providing the same kind of benefits to the CDS market.” Tradeweb is co-owned by Thomson Reuters and a consortium of dealers: Citigroup, Credit Suisse, Deutsche Bank, Goldman, JP Morgan Chase & Co., Merrill Lynch & Co., Morgan Stanley, Royal Bank of Scotland and UBS.
Bond-trading platform MarketAxess, which also offers electronic CDS trading, did not respond to a request for comment.
A major benefit of the new service, says Tradeweb, is that it offers institutional clients access to the liquidity of its dealer-owners. The service also offers connectivity to third parties, including the Depository Trust & Clearing Corp.’s Deriv-Serv platform and Trade Information Warehouse, as well as traders’ order management systems; full audit trails on all trades; electronic capture of trade details in real time through its application programming interface messaging service; and access to Tradeweb’s AccountNet derivatives database, which maintains settlement instructions and delivers electronic allocations to dealers.
“As one of the leading CDS dealers, we are keen to provide solutions that allow our clients to trade more effectively,” Eraj Shirvani, head of European credit at Credit Suisse and chairman of the International Swaps & Derivatives Association, said in a statement. “We support the growth of electronic trading as it provides for a more efficient marketplace and look forward to using Tradeweb as a distribution channel for better servicing our clients in the CDS market.”
Added Brian Walter, managing director and head of U.S. credit index trading at UBS: “We believe the liquidity that clients will find on Tradeweb will prove to be very compelling, and the capabilities for automated trade booking will benefit all market participants.”
