Creditex Group Inc., in a move to capitalize on the anticipated growth in loan-only credit default swaps (LCDS), has acquired a minority stake in privately held Trade Settlement Inc. (“TSI”), a provider of settlement services to the global primary and secondary syndicated loan markets. As part of the transaction, the two firms also announced a partnership between TSI and T-Zero, a leading credit derivative processing platform which is an independently managed subsidiary of Creditex Group.
The investment by Creditex Group comes as TSI prepares to expand its post-trade platform for primary and secondary syndicated loans to the European market. TSI already has gained rapid adoption among participants in the US loan market and will provide significant post-trade benefits to European market participants later this year.
“We are very pleased to make this strategic investment in TSI,” said Sunil Hirani, ceo of Creditex Group. “This relationship is a natural extension of our efforts to work with the industry to reduce operational risk and ensure a smooth, post-trade environment. We look forward to TSI’s continued growth and success in the US and to the expansion of its platform and services in Europe.”
The announcements also come as the market prepares for the much-anticipated launch of LCDX, a credit default swap index that will consist of 100 reference entities, referencing 1st lien loans. Market participants expect rapid growth in both the new index and single-name LCDS, particularly as the credit cycle turns less benign.
The partnership between TSI and T-Zero will benefit LCDX and LCDS market participants by bringing together T-Zero’s affirmation platform and extensive credit derivative expertise with TSI’s settlement platform and extensive loan expertise. The two firms will work together to provide an integrated solution for accurate trade capture, straight-through-processing (STP) and settlement of loan credit derivatives.
“JPMorgan has been heavily involved in the development of operational solutions for both the CDS and loan markets,” said Eric Rosen, head of North American Credit Trading at JPMorgan. “We were early supporters of both the TSI and T-Zero platforms, and we are delighted to see these two firms working together to create a unique offering that combines their respective loan and CDS expertise.”
