TIW's Lifecycle Event Processing services manage all phases of the post-trade process for over-the-counter (OTC) credit derivatives.
TIW provides post-trade processing for OTC credit default swap (CDS) contract positions throughout their multi-year lifecycles. TIW provides a comprehensive electronic service that automates lifecycle processing for payment calculations, successor events such as reorganizations or renames of corporate entities, and credit events such as bankruptcies, restructurings and insolvencies. Various events can occur that require action to facilitate the terms of the contracts in the TIW Warehouse (Warehouse), and TIW is equipped to automate the processing associated with those events.
Post-trade events include:
- Payment calculation and bilateral netting – TIW calculates payments on all “gold calc” confirmed CDS contracts and creates real-time bilateral nets for each currency.
- Renames and reorganizations – TIW supports the automated reprocessing of affected positions in the Warehouse either to update positions to reflect the company name change or to split the position records to reflect the splitting of the corporation into one or more new corporations.
- Credit events – TIW supports the trade processing associated with events of defaults such as bankruptcy, failure to pay and restructuring that may trigger pay-outs for the buyers of the credit protection for the underlying reference entity of the credit derivative. Automated Warehouse event processing includes:
- Coupon payment recalculations, and calculation of the credit event recovery and rebate amounts based on auction results;
- Automated exit of the transactions for single-named trades exhausted by the credit event; and
- Factor adjustment and re-versioning to new Markit RED ID for affected index transactions.
- Loan Early Termination – TIW supports the early termination of loans for LCDS, loan CDS index (LCDX) and European loan-only CDS (ELCDS) transactions in the Warehouse.
Who Can Use the Service
Lifecycle Event Processing is available to any firm that is a user of TIW, either directly as a participant or through a participant as a correspondent firm. This service is also available to central counterparties (CCPs) that leverage lifecycle processing.
Lifecycle Event Processing:
- Increases market participants’ control over payments processing by providing an automated way to start or stop automatic calculation of coupon payments for a specific trade.
- Minimizes time and cost by automating payment calculations and providing bilateral netting of payments for firms participating in the Warehouse.
- Increases efficiency by streamlining the trade adherence process for lifecycle events.
- Reduces risk by handling all credit events and successor events identically for each participant, in the same time frame and with the same deadlines.
How the Service Works
For credit events and restructuring events, DTCC is notified of an event through a public announcement by an International Swaps and Derivatives Association (ISDA) Determinations Committee through the establishment of the Big Bang and Small Bang protocols. Based on the auction results managed by the industry, TIW calculates payments and, where appropriate, sends the payments for central settlement in multiple currencies at CLS Bank International. TIW is able to handle multiple credit events simultaneously, reducing risk to participants.
For renaming events, TIW automatically converts old names to new names for all applicable transactions in the Warehouse.
For a reorganization, TIW exits the original trade, creates a new trade based on the new information and recalculates payments based on the new information.
For restructuring events, TIW also supports the trigger notification process prior to the auction determination. The trigger notifications are reported by TIW to the ISDA Determinations Committee to help serve in its decision as whether an auction event should be held for the relevant maturity buckets. Based on the ISDA Determinations Committee decision, separate auctions are subsequently held, based on maturity buckets. The processing of the recovery amount calculations follow the same workflow as provided for credit event processing.
For More Information
To request additional information, please click here.