First CDS electronically traded and cleared under Dodd-Frank rules

Deutsche Bank has executed the first fully electronic Credit Default Swap (CDS) trades, which could be compliant under upcoming new US regulations, taking pole position in what is expected to become a significant growth area. The USD-denominated swap trades between the Bank and BlueMountain Capital Management, a US-based hedge fund, are the first electronically executed and cleared CDS transactions that could satisfy the regulatory framework set out in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Act is currently being finalised and is expected to be in force by July 2011.

The CDS trades were conducted on 10 February, 2011 via the Tradeweb platform. Tradeweb, which is owned by Thomson Reuters and a consortium of dealers, facilitates derivative trades between banks and their clients.

Deutsche Bank's leadership position is significant because under Dodd-Frank, much of the swaps market will have to be traded electronically and centrally cleared by clearinghouses that guarantee the swap in case either counterparty fails. The trade underlines the bank's existing strength in electronic trading, providing integrated electronic services across the entire lifecycle of an OTC derivative transaction. Through important business firsts like this, Deutsche Bank empowers its clients with greater transparency and risk management capabilities in pre-trade, trade and post-trade services and continues to drive innovation in the derivatives industry.

"The financial markets are now preparing for the new regulatory environment under Dodd-Frank," said Scott Beardsley, Principal and Head of Operations at Blue Mountain Capital Management.

"Today's trade represents the first-ever transaction to fit within what many market participants expect to be the new model for central clearing and electronic execution of derivatives. We are supportive of this evolution and expect to see a healthy and competitive landscape among the various market offerings