Laying the Trac-x

technology news

AJPMorgan and Morgan Stanley are merging their emerging markets and Japanese tradable credit default swap indices under the Trac-x brand.

Trac-x Emerging Markets, which replaces JPMorgan’s Emdi, will allow investors to take exposure to 19 sovereign emerging market borrowers via a portfolio of five-year credit default swaps.

In Japan, JPMorgan and Morgan Stanley’s MSJ-CDS are being merged to become Trac-x Japan, which will give investors exposure to the 50 most liquid Japanese credit default swaps via one trade.

Trac-x is the result of the two banks’ decision earlier this year to merge their US and European basket-linked note products – Jeci and Tracers respectively. Trac-x allows investors to buy exposure to a portfolio of credits via one credit default swap trade – similar to a credit-linked note. In the US and European indices, the names are the most liquidly traded credits in the credit default swap market, as determined by JPMorgan and Morgan Stanley’s figures.

As with the US and European Trac-x products, the emerging markets and Japanese indices will both be updated every six months to take account of new trading figures, and any credit events or downgrades that have affected the portfolio of credits. In Japan, JPMorgan and Morgan Stanley expect to be able to offer a maximum bid-offer spread of 50 cents.

In addition, the two banks also launched options trading on Trac-x Europe in mid-July. The options are European style and provide investors with the right to buy or sell Trac-x Europe protection at a pre-agreed spread level.

ASunGard’s twin win

Two European banks, Commerzbank of Germany and Franco-Belgian bank Fortis, have selected SunGard Trading and Risk Systems’ Credient Analytics.

Credient, which was developed in conjunction with the UK’s Oxford University, allows banks and financial institutions to calculate their aggregate exposure to their counterparties’ credit risk and their total derivatives exposure.

In the case of Commerzbank, Credient will provide real-time data on the investment banking arm’s cross-asset credit exposure and will help the bank meet stringent German regulatory requirements. Under Basel II, German banks will face strict credit risk regulatory requirements that stipulate that banks not only must assess their credit risk across a wide array of portfolios, but also produce simulations of their credit risk in line with each bank’s level of trading sophistication.

In the case of Fortis Bank, Credient will allow the bank’s global trading operation to calculate the aggregate counterparty credit exposures on the roughly 100,000 deals per month that pass through Fortis.

AMore technology news...

• Northern Trust, a Chicago-based securities custodian, has launched an online investment monitoring tool for institutional investors, which predicts the effect of certain events on different asset classes. The product, Event Analyst, lets investors set price limits on different assets; if those limits are broken investors are automatically notified by email.

• US investment firm T Rowe Price has announced it is to roll out Charles River’s Investment Management System (IMS) to its 75 fixed-income dealers across six trading desks at its Baltimore and London offices.

• Fitch Risk has launched Internal Ratings Validation Service to help financial institutions work out how their internal credit ratings match up with external independent ratings. This will allow financial services firms to use their internal ratings to calculate regulatory capital requirements under the new Basel II bank regulation guidelines.

• Thomson Financial has added new issues and syndicated loan data to its Thomson One Banker-Deals, an online database of bond, equity, syndicated loan, M&A, and project finance deals.

• European Commission Capital Adequacy Directive (CAD3) consultation paper, which outlines the implementation of the Basel II Accord into EU legislation, may require European asset managers to hold significantly more capital than they currently do, according to a Basel II impact study published by risk management consultants Mercer. Oliver Wyman.