ReMATCH, the credit default swap (CDS) portfolio rebalancing and market risk mitigation service, announced on Tuesday that it has expanded its service to include US financials. In its first four runs, ReMATCH reduced a total of $8.4 billion in CDS trades on US financial reference credits including American Express, Capital One Financial, GE, and other large US financial institutions.
Steve Schiff, CEO of ReMATCH said; “ReMATCH’s success in reducing sovereign and emerging market CDS risk built up in the banking system has encouraged dealers to look at reducing accumulated market risk exposure to their counterparties in the US financials market.”
ReMATCH has its roots in emerging markets CDS. Since its expansion into Western European sovereign CDS in November 2010, ReMATCH has successfully completed risk reducing sessions in CDS on Portugal, Ireland, Italy, Greece and Spain, as well as five other Western European sovereigns. In total, ReMATCH has helped traders reduce $32.4 billion in sovereign CDS market risk.
ReMATCH is a post-trade bulk risk mitigation service that identifies and removes market risks that accumulate as a result of market making and the management of legacy portfolios in the CDS market. While most of the liquidity in the CDS market is focused around the five-year maturity, trading portfolios build up net open positions with maturities that shorten over time but are significantly more difficult to exit. Rematch addresses the problem of minimal or no exit liquidity at these “off the run” points in a trader’s CDS portfolio, and reduces the market risk created by the build up of these illiquid positions. In each session, ReMATCH collects portfolio data from participating banks and uses proprietary technology to build accurate mid-level curves and generate risk-reducing trades, enabling market participants to exit positions that they may otherwise have been unable to.
Since its launch in October 2009, ReMATCH has worked with the majority of major banks to reduce exposures to CDS market risks in European and Latin American emerging market CDS and Western European sovereign CDS. ReMATCH is part of the Post Trade Risk and Information portfolio of businesses of ICAP plc (IAP.L).
