SwapsWire Launches Credit Default Swap Automated Confirmation Service

19th November 2003

Five dealers have begun sending credit default swap (CDS) confirmations between themselves using SwapsWire’s service. Typically CDS trades take several days to be confirmed using the current fax-based process. According to the ISDA 2003 Operations Benchmarking Survey, dealers on average have more than 21 business days’ worth of confirmation volumes sent but not yet finalized. Using SwapsWire, trades can be confirmed within minutes of execution. The trade booking is initially taking place in parallel with the banks’ existing confirmation process. A number of dealers will start to use the system to completely replace their existing confirmation process from November 20th.

The easy-to-use input screens and use of templates with market-standard defaults allow trades to be captured and confirmed quickly and easily. SwapsWire allows the existing term sheet, voice checkout and written confirmation steps to be combined into a single action, which occurs close to execution. This means both cost savings on the processing side, and a reduction in operational risk because trades are fully confirmed the same day. The benefits of the speed and ease of use of the SwapsWire system are evident to the dealers. The SwapsWire process has already quickly pinpointed more than one trade where there was an issue to be resolved with the counterparty. This would previously have taken days to identify and resolve.

The system allows dealers to confirm trade details between each other using standardized terms and defaults in either short or long form. The new service supports confirmation of Corporate and Sovereign CDS trades for European, North American, Latin American and Central and Eastern European reference entity names with support for Asia Pacific to follow shortly.
Mark-It Partners’ Red (Reference Entity) database is fully integrated, allowing Red subscribers to easily confirm trades using this data without having to go through a complex data integration exercise. Users can also load their own reference data.

Chip Carver, CEO of SwapsWire Ltd. noted "Our setup allows dealers to agree quickly the legal confirmation and to know that they have the exact same trade details in their respective systems. Traditionally each side processes a trade through multiple systems before finally confirming it, so it takes longer to complete a confirmation. When there is a mismatch, correcting the error and pushing the trade back through these systems further complicates the process and extends the time taken to confirm the transaction."

SwapsWire can be used on a stand-alone basis, or by using an application programming interface (API) dealers can fully integrate SwapsWire with their internal systems. In the implementation of SwapsWire for CDS, the banks have benefited from their experiences with SwapsWire’s IRS product. The CDS confirmation service will use the recently published ISDA FpML 4-0 XML-based protocol to support the electronic confirmation of transactions under both 2003 and 1999 ISDA Definitions.

Over $6 Trillion face value of interest rate swaps (IRS) have already been booked on the platform first launched in October 2002. The service is live at 50 sites in Europe, Asia and the USA.

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