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Last month, Tradeweb became the first electronic trading platform to deploy the request-for-market (RFM) protocol to facilitate a fully electronic single name CDS trade. The two-way market, for which BNP Paribas acted as liquidity provider, involved an emerging market sovereign CDS product, and was executed on Tradeweb’s institutional credit platform.
This trade marks an important step forward in the electronification of our markets in many ways. On the evolutionary scale of electronic fixed income and derivatives trading, U.S. Treasuries and European government bonds were the first asset classes to walk upright in electronic markets. Moving relatively quickly along the continuum from the moment the first trade executed over the internet in 1998, the majority of government bond trades are now executed electronically. In comparison, single name credit default swaps (CDS), which are derivative contracts between two parties tied to the credit risk of a single borrower such as a corporate or sovereign issuer, have moved at a slower pace. While underlying corporate bonds and even CDS indices have seen significant electronic trading volumes for many years, single name CDS have lagged behind this growing trend.
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