TriOptima announced today that the number of derivative dealers participating in its multi-lateral CDS index tranche terminations and the volume of transactions terminated had doubled since the first cycle in this product type a year ago. Fourteen dealers terminated over 4600 transactions in the Euro and U.S. Dollar denominated instruments during May and June.
By eliminating these tranche trades, dealers also eliminated the costly operational, legal and administrative procedures that would likely ensue if any of the underlying entities in an index experienced a credit event. CDS index tranches, a specialized type of credit derivative, enable the trading of credit risk correlations across a portfolio of underlying entities in an index. These structures include a series of credit event triggers that require careful monitoring over the entire life of the contract.
Raf Pritchard, head of client management in North America, said, “We continue to see impressive growth in tranche terminations, both in terms of participants and numbers of trades, underscoring the value to subscribers of reducing their trades in these high-profile instruments.”