Online credit derivatives trading platform creditex plans to offer asset swap trading, loan trading and a database of credit default swap spreads in the second quarter. Andrea Danese, coo in London, said creditex has now set up offices globally, and sees expanding its product range as the next step in growing the platform into a full credit platform. Access to the asset swap and loan market is essential for credit derivatives traders, who use these markets to hedge and price trades, according to Danese. Although the same is true of the bond market, it is already crowded with online platforms, he added. Only a handful of platforms exist for asset swaps and loan trading.
Creditex will hire one or two marketers in London and another in New York to get clients on board. Danese said the marketers are mostly likely to come on board from a bank or a broker where they will have held a similar role. Loan trading will be done out of a separate company, set up as a joint venture with major players in the market.
The database is still being designed, but it will likely be a subscription-based system with daily prices on about 100 mostly investment-grade credit default swaps, and historical prices on one, three, five, seven and 10-year default swaps. The prices will come from creditex's database and from subscribers. Danese hopes to start with prices from five to eight market makers and increase that to 30-50 users.
Danese, who was formerly at Deutsche Bank, said even the largest banks do not have a good database of prices and this can lead to problems in marking the books to market. He estimated that a single digit percentage of a bank's positions cannot be market to market when liquidity is low. A trader at a major credit derivatives house in London agreed that banks' databases are not complete, and added that if creditex's database were comprehensive, he would use it instead of the bank's own.
