Press release
June 12, 2006
TriOptima eliminates 1000 transactions in the first-ever CDS index tranche termination cycle
TriOptima, the established service for reducing OTC derivative swap portfolios, today announced that it had terminated 1000 Dow Jones CDX credit default swap (CDS) index tranches with a notional value of $14.5 billion. These terminations represent 20% of the estimated 5000 American index tranche transactions outstanding between the six participating derivative dealers.
By eliminating these tranche trades, dealers also eliminated potential costly operational, legal and administrative procedures that would ensue if any of the underlying entities in an index experienced a credit event. CDS index tranches, a specialized type of credit derivative, were developed to enable the trading of credit risk correlations across the portfolio of underlying entities in an index, and are structured with a series of credit event triggers that require careful monitoring.
Brian Meese, TriOptima.s CEO, said, "The success of this first termination cycle in CDS index tranches is significant given the potentially complex operational exposures if credit events affected the underlying entities. We plan to offer dealers both in the US and Europe additional opportunities to terminate these trades later this year. TriOptima is constantly expanding its range of post trade services to meet our subscribers. needs and interests, and this initial index tranche cycle gives dealers another tool to achieve their goal of reducing operational exposures in the credit derivatives market."
Since the beginning of 2005, TriOptima subscribers have terminated over 125,000 single name and index CDS trades with a notional value of $3 trillion. These terminations were executed in both regularly scheduled cycles and special cycles related to the defaults of Collins and Aikman, Delphi, Calpine, and Dana Corp.