Thirteen institutions are expected to take part in the first round of tear-ups before the end of this month, Isda said. The process is intended to reduce the number of outstanding credit derivatives deals, simplifying risk assessment and management while leaving risk and payment profiles unaffected.
Earlier rounds of portfolio compression have seen millions of derivatives trades with total values of up to $16 trillion terminated, with companies such as TriOptima, which was also one of 11 companies competing for the Isda endorsement, running special termination cycles to deal with major default events. Isda said the Creditex/Markit process will focus on single-name rather than index trades. It will "improve on previous tear-up processes by delivering significantly better compression results while leaving market risk profiles unchanged," Creditex and Markit said.