The Depository Trust & Clearing Corporation (DTCC) announced today that, based on gross and net positions maintained at its Trade Information Warehouse (Warehouse) relating to the Washington Mutual Inc. (WaMu) credit event, the net funds to be transferred on outstanding single–name credit default swaps from net sellers to net buyers of protection are expected to be approximately $1.3 billion in U.S. dollar equivalents.
The calculated amount is based on the net notional value of outstanding single–name credit default swaps (CDS) with WaMu as reference entity registered in the Warehouse. That value stood at approximately $2.9 billion as of October 23, 2008. Based on the October 23 credit event auction, which set a price of 57 cents on the dollar for WaMu bonds, the net funds transfer on the single–name CDS amounts to approximately $1.3 billion. Gross notional value of outstanding single name credit default swaps for WaMu registered in the warehouse stood at $41 billion as of yesterday.
WaMu is also a component in approximately 35 indices serviced by the Trade Information Warehouse, with component percentages ranging from 0.80% to 4.17%. These positions will be incorporated into the net settlement requirements for buyers and sellers of protection between now and November 7, the settlement date for the WaMu credit event.
At the time of settlement, DTCC will announce final net funds transfer results based on the single–name and index contracts registered in the Warehouse.
The vast majority of credit default swaps traded globally since November 2006 have been registered in the Warehouse. In addition, all major global CDS dealers have registered in the Warehouse the vast majority of all contracts executed among each other before the Warehouse´s November 2006 launch.
Icelandic banks
The Trade Information Warehouse is also preparing to process the credit events for Iceland´s three banks for which credit events were determined earlier this month. Net fund transfer requirements between net sellers and net buyers of protection will be determined at the conclusion of the auctions to be held on the dates indicated below. The maximum amount of net funds transfer will be capped by the net notional value for each reference entity. DTCC will announce final net funds transfer results at the time of settlement for these three entities, Landsbanki Islands hf, Glitnir Banki hf and Kaupping Banki hf. Cash settlement for the three banks is scheduled for November 20, 2008.
Information on the three banks is as follows:
| Reference Entity | Event Determination Date | Auction Date | Gross Notional Value (USD eq.) | Net Notional Value (USD eq.) | ||||||||
| Landsbanki Islands hf | October 8, 2008 | November 4, 2008 | $19.2 billion | $1.8 billion | ||||||||
| Glitnir Banki hf | October 8, 2008 | November 5, 2008 | $17.5 billion | $2.0 billion | ||||||||
| Kaupping Banki hf | October 9, 2008 | November 6, 2008 | $34.3 billion | $3.8 billion |
Trade Information Warehouse
The Trade Information Warehouse, a service offering of DTCC Deriv/SERV LLC, is the market´s first and only comprehensive trade database and centralized electronic infrastructure for post–trade processing of over–the–counter derivatives contracts over their lifecycles, from confirmation through to final settlement.
Among the Warehouse´s central servicing functions is payment calculation for registered contracts, including cash payments due upon the bankruptcy or other credit event of any company on which credit default swap contracts are written. Calculated amounts are netted on a bilateral basis, and then, for firms electing to use the service, transmitted to CLS Bank International, where they are combined with foreign exchange settlement obligations and settled on a multi–lateral net basis. Currently all major global CDS dealers use CLS Bank to settle obligations under credit default swaps. It is expected that all major institutional players in the CDS market will use the same process for settlement by the end of 2009.
About DTCC
DTCC, through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage–backed securities, money market instruments and over–the–counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC´s depository provides custody and asset servicing for more than 3.5 million securities issues from the United States and 110 other countries and territories, valued at US$40 trillion. In 2007, DTCC settled more than US$1.86 quadrillion in securities transactions. DTCC has operating facilities in multiple locations in the United States and overseas.
DTCC Deriv/SERV LLC, a wholly–owned subsidiary of DTCC, provides automated matching and confirmation for OTC derivatives contracts, including credit, equity and interest rate derivatives. According to major market participants, over 90% of credit derivatives traded globally are electronically confirmed through Deriv/SERV. The Trade Information Warehouse, a service offering of Deriv/SERV launched in November 2006, is the market´s first and only comprehensive trade database and centralized electronic infrastructure for post–trade processing of OTC derivatives contracts over their lifecycles, from confirmation through to final settlement.
