The Depository Trust & Clearing Corporation (DTCC) signed its 250th buy-side customer onto Deriv/SERV, signaling its growing prominence as the largest post-trade service provider in the over-the-counter (OTC) derivatives marketplace.
Deriv/SERV automates matching and confirmation for credit derivatives and other OTC derivatives. According to major market participants, more than 60% of credit derivatives traded globally are electronically confirmed through Deriv/SERV, up from 15% in 2004. The service’s customers include all of the major derivatives dealers globally, as well as a rapidly expanding base of leading buy-side firms, such as hedge funds, investment managers and insurance companies.
Deriv/SERV’s 250th buy-side customer is Robeco, a global asset manager headquartered in the Netherlands with offices in Europe, the U.S. and elsewhere. Robeco provides investment products and services to around 700 institutional and 1.5 million private clients worldwide.
"Reaching our 250th buy-side customer is a significant milestone because it demonstrates strong market commitment to having a single service provider automate the OTC derivatives marketplace," said Janet Wynn, managing director and general manager, DTCC Deriv/SERV. "We expect that before yearend, Deriv/SERV will add at least another 150 buy-side firms to its current customer base."
Trading in the OTC derivatives market – particularly in credit default swaps (CDS) – continues to grow at a blazing pace. According to the International Swaps and Derivatives Association (ISDA), the total notional value of CDS outstanding exceeded $12 trillion by June 2005 – a growth rate of 48% in just the first half of the year, remarkable for a market that hardly existed in 2000.
"Deriv/SERV is providing important improvements in the fast-growing OTC derivatives market for instruments like CDS, CDX, iTraxx and swaps," said Erik van Leeuwen, senior vice president, Business Development-Fixed Income at Robeco. "The growing usage by both the buy side and the sell side to use this platform for legal matching of trades is diminishing the workload and decreasing the risk of errors. Deriv/SERV is giving a boost to further professionalize this market."
"Deriv/SERV’s success to date is only one step in a larger effort by DTCC to automate the OTC derivatives market," said Peter Axilrod, managing director, DTCC New Business Development. "Our vision is to offer ‘one-stop’ servicing for OTC derivatives, from affirmation of the trade at the trader’s desk, to confirmation and matching, payment processing, and a trade information warehouse and ‘downstream’ processing infrastructure."
Prior to Deriv/SERV’s entry into this market, confirmations for credit derivatives trades were processed manually, involving labour-intensive, paper-based processing by fax and telephone. Deriv/SERV fosters a fully automated, straight-through process, which allows dealers and buy-side firms to process trades in a timely and efficient manner.