Does the launch of credit default swaps and the pending launch of dollar-denominated products signal the return of a once-innovative giant?
Eurex’s new London-based management team broke into full public view in early September after months of flying below the radar of competitors and customers. Both Andreas Preuss, who replaced Rudi Ferscha as chief executive in April, and Brendan Bradley, who became head of product development in August, spoke openly at the annual Burgenstock conference near Luzerne, Switzerland, about the first wave of new products expected to be unveiled next year: credit default futures.
“This product has essentially been ready to go since last year, but we had to wait until ISDA (the International Swaps and Derivatives Association) finalized its procedures for delivering notices if an event occurs,” says Bradley.
In credit default parlance, an “event” can be anything from a major downgrade to an outright default. ISDA released its delivery procedure for notices, along with a time line to summarize certain key settlement procedures in February, but the procedure has not truly been tested — and can’t be until an event actually occurs. Still, Eurex is going ahead with an index-based futures product, with details to emerge in the coming months.
Bradley has mused on developing a tradable credit-default index and then launching futures on it for more than a decade, and his arrival at Eurex has sparked speculation that the exchange could return to its innovative ways. Bradley was a consultant to Eurex forerunner the Deutsche Terminboerse (DTB) in its most creative phase, when Preuss was then-boss Joerg Franke’s right-hand man.
The exchange will be able to offer dollar-denominated products early next year, and plan some sort of Russian indexes shortly thereafter.