Mark-it Partners Establishes New Industry Standard with RED
Mark-it Partners, the leading credit derivatives data provider, has launched a new service that provides a market standard for the identification of credit derivative long legal names based on the Reference Entity Database ("RED") Service. The Service is a significant boost for global financial institutions that have had to grapple with a series of legal and operational risks in the credit markets, including mismatched trades and incorrect internal aggregation of credit risk.
Mark-it Partners won the mandate to provide the RED Service earlier this year from Deutsche Bank, Goldman Sachs and JPMorgan, who jointly founded RED to enhance liquidity, transparency and standardization in the credit derivatives market. An advisory board made up of senior representatives of leading firms from the credit markets has been established to ensure that the RED Service continues to develop in line with the strategic growth of the credit markets and is adopted quickly as the market standard.
The RED Service builds on the existing services provided by Mark-it Partners to develop and improve the infrastructure in the credit markets and to reduce the costs per transaction to institutions. RED plays an important part in facilitating the electronic trade confirmation of Credit Default Swaps, a long-awaited 'automation' in a market that has experienced compounded annual growth in excess of 70% per annum over the last 5 years. RED has already been integrated into the world's two electronic trade-confirmation platforms, the Depository Trust & Clearing Corporation (DTCC) and Swapswire. Counterparties can now use standard RED codes when confirming transactions, and this dramatically increases the precision and speed of trade confirmation on credit default swaps.
There are extremely detailed processes that sit behind the RED Service that ensure that the Reference Entity Database is accurate. An extensive legal verification process of company documentation from local jurisdictions confirms a reference entity's long legal name and its relationship in a pair to a reference obligation.Two sets of unique alphanumeric codes -- 'CUSIP-linked Entity MIP codes' -- are created; one to identify the entity's long legal name and one to establish the pair. The database currently contains 1,000 reference entities traded in the credit derivatives market, and Mark-it Partners intends to double this to 2,000 by year-end. RED is straightforward to use and can be accessed via an XML/CSV file and soon, via the Mark-it Partners website.
Lance Uggla, Chief Executive of Mark-it Partners said, "RED is a catalyst for the growth of the credit derivatives market. Goldman Sachs, Deutsche Bank and JPMorgan started the process of developing an industry standard, and now its launch to the wider market will be warmly welcomed. Coupled with the wider ramifications of Basle II, there has never been a greater need for RED. We have exciting plans for the development of RED, and we look forward to ensuring that it becomes an invaluable service for all participants in the credit derivatives market."
Peter Axilrod, Managing Director, DTCC Business Development, said, "At the request of our initial subscribers, DTCC's credit default swap matching service will support matching of reference data using Project RED identifiers. Our subscribers include 13 of the largest credit default swap dealers worldwide."
Chip Carver, CEO of SwapsWire, said, "We are excited that our proven process of confirming derivative trades, moments after execution, will be extended from the interest rate market to the CDS market. The availability of the RED Service via SwapsWire will greatly reduce the number of outstanding confirms created by the existing matching process while lowering operational costs and risks."