The credit derivatives industry is currently working together to improve the efficiency of trade processing in the light of a huge backlog of unconfirmed trades. In a recent letter to the Federal Reserve Bank of New York, fourteen of the world's largest banks pledged to cut that backlog by 70% and committed to a raft of measures aimed at harmonising trade processing.
According to International Swaps & Derivatives Association (ISDA) figures, the notional principal outstanding volume of credit default swaps (CDS) grew 105% in 2005, to $17.3 trillion.
âThis is a huge problem, and back office initiatives are only part of the solution,â said Anvil Director and Strategist Malcolm Clark. âTackling the way trades are handled in the front office would go a long way to improving the situation.â
He continued, âA clean and understandable trading book is the best place to start. A lot of organisations get into trouble because they are still tracking trades on spreadsheets or, in some scary instances, in tradersâ heads. If every organisation had a clear and understandable front office trading system there would be fewer problems downstream.â
Anvil is a long-term provider of front- and middle-office trading tools that help traders understand their positions and trading opportunities in a range of markets. Anvilâs Denarius product is actively being used by clients trading in the CDS market.