UBS launches Platform For Credit-Default Swaps

UBS has announced the launch of a new platform for trading Credit Default Swaps.

The platform, is an extension of the Price Improvement Network (PIN), first introduced in 2010.

In two announcements, UBS has extended PIN-FI to include:

Trading of CDS: UBS is the first major dealer to bring this type of electronic swaps execution-platform to the CDS market. About 50 clients–including asset managers, hedge funds and endowments–are trading on the platform so far, said UBS in an interview Friday, without disclosing names.

Customers are mostly trading default protection on individual borrowers, called “single-name” CDS, so far rather than index CDS, although a market for index trades is available. The platform also offers live prices in single-name CDS, something that is rare, in addition to live index prices. That means a customer can execute immediately and not have to wait for their trading partner to post a firm price. Lives prices are available on 60% to 70% of the names quoted.

Partnership with TradingScreen: UBS has extended the reach of PIN-FI, its internal fixed income liquidity platform for institutional buy-side clients, through a partnership with order and execution management system vendor TradingScreen.

Delivering liquidity & retaining client relationships

UBS may be the first, but the rest of the top-tier banks will be quick to follow, as they seek ways to enhance the value of their single dealer platforms, as ‘the liquidity channel of choice’, in the new market structure of Dodd Frank, Sefs and clearing.

UBS eventually could act as clearing agent on all CDS trades executed on the new platform, even when its execution desk has lost a trade to another firm. That would let it retain customers–and the associated fees–in other areas of business beyond the trading desk.

For now, however, before the swaps regulatory overhaul is implemented, UBS will make money from the bid/offer spreads on trades its own desk wins and a commission on trades customers do with other customers.

3 Responses

  1. […] View on SDP routing to SEFs: As we have previously mentioned here, here and here, buyside firms will not want the cost of connecting to many SEFs, and we continue to […]

  2. […] away from providing costly inventory based principal trading and moving to an agency model such as UBS PIN. In these markets, the value proposition for the bank shifts downstream, where the bank will provide […]

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