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Bloomberg- IDX to Start
Offering Live Credit Derivative Prices
IDX Capital, an inter-dealer broker founded
in June, plans to offer banks live pricing
on credit derivative trades starting tomorrow.
IDX will begin matching buyers and sellers
of contracts that let investors bet on
credit quality via an electronic trading
platform that shows prices and charges
brokerage fees only to banks that initiate
trades.
Through its electronic trading platform,
IDX Live, the New York-based broker will
be the first to offer executable prices
with an ``aggressor only'' fee model where
banks that transact at bids or offers
posted on a trading screen are charged
a fee while banks that provide the prices
are charged nothing.
With live prices and a fee structure
that can save dealers ``as much as half''
on brokerage fees, IDX will try to take
business from inter-dealer brokers such
as GFI Group Inc., Chapdelaine & Co.
Inc., Collins Stewart Tullett PLC, Creditex
and CreditTrade. In a credit-default swap,
buyers pay an annual fee similar to a
premium to protect a certain amount of
corporate or sovereign debt against default
for a specified number of years. In the
event of a default, they are paid the
face value of the bonds or loans.
IDX is launching its service at a time
when banks are trying to automate trading
in the $12.4 trillion credit derivatives
market to alleviate concerns about trade
processing delays at regulators such as
the New York Federal Reserve. IDX will
start with eight brokers in New York and
may expand to Europe and Asia, Hunter
said.
The firm's trading system has been installed
at 10 dealers including Deutsche Bank
AG, Lehman Brothers Holdings Inc. and
ABN Amro Holding NV.
Derivatives are financial contracts whose
value is derived from interest rates,
the outcome of specific events, or the
price of underlying assets such as debt,
equities, commodities and currencies.
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