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T-Zero Says It Exceeds OMG’s Credit Derivatives Processing Commitments
August 5, 2008
T-Zero, provider of a trade affirmation and novation processing platform for credit default swaps (CDS), said it has already exceeded many of the targets set by a group of dealers, buy-side firms and industry bodies to improve processing in the over-the-counter derivatives market.
The Operations Management Group (OMG) set the goals in a July 31 letter to Timothy Geithner, president of the Federal Reserve Bank of New York, in response to regulatory demands. By Dec. 31, the group aims to match 95 percent of CDS eligible for the Depository Trust & Clearing Corp.’s (DTCC) Trade Information Warehouse within five days of the trade date (T+5). Those instruments include single-name and index credit default swaps and CDS index tranches.
The OMG also pledged that by year-end it will submit 92 percent of trades to the DTCC without amendment and within one day of the deal and communicate all novation consents using an electronic platform. T-Zero says that its users are in compliance with those targets and that more than 90 of its 200-plus buy-side clients have adopted its Novations+ service, which eliminates the communication of novations via e-mail.
“We are pleased to be working closely with all market participants to help achieve the latest goals set by the Operations Management Group,” said Mark Beeston, president of T-Zero, in a statement. “T-Zero provides the highest level of interoperability with the DTCC Trade Information Warehouse and provides the front-office system-to-system connectivity necessary to achieve T+0 matching today.”
According to T-Zero, the processing improvements have been facilitated by two services--Auto-Affirmation and GoldSync+--that were introduced over the past year. Auto-Affirmation provides real-time, system-to-system connectivity between dealers’ front-office trade-capture systems and their fund manager clients, who many point to as the biggest roadblock to automation. GoldSync offers real-time access to the Trade Information Warehouse.
In an Aug. 1 statement, T-Zero, a subsidiary of Creditex Group, which is in the process of being acquired by the IntercontinentalExchange, cited the example of a large fund that adopted Auto-Affirmation: “T-Zero was able to match trade details and submit the fund’s trade allocations back to the dealer counterparty in three seconds. The four allocations were confirmed at DTCC in under 30 minutes with T-Zero delivering trade records in real time on behalf of the client.”
Beeston said that the electronic novation figures are based on a recent survey of users, while the other results are from June.
On July 21, Markit Group and DTCC announced plans to form a joint venture that will provide buy- and sell-side firms with a unified system for OTC derivative confirmations, affirmations, allocations and novations. Although T-Zero benchmarks its clients monthly, it is likely seeking a competitive edge by releasing the numbers. “It’s important for the industry to know there are technologies which could help them achieve the OMG’s goals and we believe our products are the best,” said Beeston.
“As a requirement of our CDS program, we mandate that all trades must be processed via T-Zero to achieve same-day processing,” said Ronald Bertolini, director of derivatives at Richmond, Va.-based Genworth Financial, in the T-Zero statement. “This is a clear benefit to us and provides a clear and efficient process.”
Also in the statement, William Lavelle, COO of Credaris, a London-based credit-specialist asset manager, said, “Having been an early adopter of T-Zero in 2006, we would feel confident that we have been exceeding these targets for some time now.”
