Isda survey finds credit derivatives backlogs improving

International banks have been making progress in speeding up the processing of credit derivatives trades, according to a survey by the International Swaps and Derivatives Association.

Over-the-counter derivatives volumes continued to increase strongly in 2005, up to a weekly average of 2,225 deals from 1,749 transactions in 2004, the Isda Operations Benchmarking Survey found. Credit derivatives saw particularly strong growth, with deal numbers increasing from an average of 206 deals a week in the 2004 survey to 446 in 2005.

After months of warnings from the Federal Reserve Bank of New York and the UK's Financial Services Authority, banks have been working to reduce delays and errors in credit derivatives trade processing. The number of back-office staff to front-office staff in credit derivatives rose to 6.3 to 10 in 2005, compared with 3.4 to 10 the previous year, the Isda study found.

However, this increase in investment has not meant an improvement in performance. The front-office error rate in both credit and equity derivatives increased from the previous year, with 17% of trades needing rebooking, up from only 8% the year before.

Confirmation delays have fallen significantly for credit derivatives, but in other areas delays have increased, and automation plans tend to focus on credit derivatives.

Isda's survey results are based on consultations with 67 institutions.