Sixteen Leading Credit Derivative Houses Agree to Adopt RED and Set Market Standard

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Thursday, September 25, 2003 10:38 am EDT

Dateline:

LONDON
"Together these institutions are responsible for the majority of trading in the credit default swap market globally. The speed with which they have committed to RED demonstrates the overwhelming need for an agreed market standard."

Mark-it Partners today announces the commitment of sixteen leading credit derivative houses to subscribe to RED, the Reference Entity Database that provides a market standard for documentation in the rapidly expanding credit default swaps market. Since acquiring Project RED from Deutsche Bank, Goldman Sachs, and JPMorgan Chase Bank last month, Mark-it Partners has agreed in principle on the subscription terms with the following institutions to use the RED service for a minimum of three years:

ABN AMRO

Bank of America

Bear Stearns

Citigroup

Credit Suisse First Boston

Deutsche Bank

Dresdner Kleinwort Wasserstein

Goldman Sachs

   

HSBC

JPMorgan Chase Bank

Lehman Brothers

Merrill Lynch

Morgan Stanley

Royal Bank of Scotland

TD Securities

UBS Warburg LLC

Lance Uggla, CEO of Mark-it Partners comments, "Together these institutions are responsible for the majority of trading in the credit default swap market globally. The speed with which they have committed to RED demonstrates the overwhelming need for an agreed market standard.

"Institutions want to be able to document trades with the confidence that the contracts being entered into are correct and economically valid. Indeed, one of the major barriers to the growth of the credit default swap market is a fear of errors being made in the documentation. Simply having a resource of accurate names is a major boon for the industry. RED will allow market participants to download the same names from a single source, avoiding the costly mistakes associated with mismatched trades."

The RED Service is a set of benchmark reference entity names and related reference obligations. It enables dealers to standardise documentation and avoid costly mistakes associated with misunderstanding the relationship between entities and obligations, which in some cases can render valuable contracts worthless.

Counterparties can now use standard RED codes when confirming transactions between themselves and customers directly. They can also conduct trade matching on either the DTCC or Swapswire platforms, which will dramatically improve the precision and speed of trade confirmation on credit default swaps.

Two sets of unique alphanumeric codes have been created by the CUSIP Service Bureau, the world?s largest and most respected national numbering agency. The database currently contains over 1,000 reference entities traded in the credit derivatives market, and Mark-it Partners intends to double this to 2,000 by year-end.

Jim Taylor, CEO of CUSIP said, "We are very excited to be involved in this project. We see RED as forming the backbone of the credit derivative market. As the market moves towards matching, settlement and clearing through centralised systems, RED will increasingly become a requirement for credit derivative transactions. The fact that major dealers are adopting the standard is indicative that this is the direction of the future."

Notes to Editors

Launched in February 2003, Mark-it Partners Ltd is an independent company offering the world's first daily service for pricing credit derivatives and cash credit instruments, providing credit data to any market participant for the first time.

Mark-it Partners contributing Partners include ABN Amro, Bank of America, Citigroup, Credit Suisse First Boston, Deutsche Bank, Dresdner Kleinwort Wasserstein, Goldman Sachs, JPMorgan Chase Bank, Lehman Brothers, Merrill Lynch, Morgan Stanley, TD Securities, and UBS. These banks feed current and historical credit data into the Mark-it system on a daily basis, facilitating better decision-making and credit risk management within banks' credit operations.