TriOptima, the award-winning provider of post trade processing services, announced that it has added special default tear up cycles to its triReduce termination schedule in response to recent market defaults.
With the bankruptcy filing of Quebeqor World Inc., TriOptima offered a single name CDS termination cycle on February 6th and an index termination cycle including Quebecor-related indices on February 14. Eliminating these transactions from their portfolios prior to the settlement auction helps CDS dealers reduce their administrative and operational costs as well as operational risk. It also relieves pressure on the auction process for the physical bonds by reducing the number of outstanding transactions in settlement.
In October 2007, TriOptima added a termination cycle in the Loan CDX index, LCDX, in response to the Movie Gallery default event, to facilitate tear ups in anticipation of the settlement auction later in the month. By eliminating 3200 transactions prior to settlement, CDS dealers reduced their administrative and operational costs and simplified settlement procedures.
"While 2006 saw several defaults and subsequent special termination cycles for Calpine, Dana, Alltel and Dura, there hadn’t been a need for special cycles for almost a year," commented Ulf Andersson, business manager for triReduce. "After the market turbulence last summer, defaults began affecting the CDS market again. triReduce makes a tangible difference by helping our clients reduce their outstanding portfolios in these distressed situations. We will continue to offer special default cycles as needed."