Markit Eyes Japan with Asia CDS Pricing

UK-based credit and derivatives data vendor Markit has expanded its global credit default swap pricing service with new snapshots during Asian market hours to appeal to a growing base of existing and potential clients in Japan, officials say.

Markit's CDS service was originally rolled out to provide end-of-day prices, though the vendor has since added four intra-day time snapshots - at 12:30pm GMT, 3:30pm GMT to provide a price at European market close, 4:30pm GMT to provide prices at UK market close, and at 4:30pm Eastern Time to cover the US market close.

The latest additions, which will be available in the second half of November, will provide price snaps at 4:30pm and 6:30pm Tokyo time.

"The [original] snaps were more useful for firms in London, but we are now seeing more activity in Asia," says Marc Barrachin, director of credit products at Markit in New York. "Traditionally in Asia, getting prices on a T+1 basis has been fine, but as the market evolves, needs are changing... and now a fund in Tokyo can use these new snaps for end-of-day valuations of everything CDS-related, rather than having to wait until the following trading day after the US close."

Barrachin says the vendor is seeing more interest from firms in Japan - particularly mid-size buy-side firms - in how credit events work, with firms using CDS prices as a tool to value other instruments. "Even if you are a cash bond investor, there is a relationship between bond trades and the recovery on the CDS," he says.

Regional offices of global firms want multiple snaps to provide an idea of volatility and for managing their P&L intraday, whereas local clients want the data for end-of-day valuations, Barrachin says.

"The biggest driver [for local price snaps] was from the local Asian market talking to our offices in Singapore and Tokyo, and it is important for us to have a stronger focus on Asia," Barrachin says. "It's about expanding our product to a large and growing part of the world." As part of this expansion, the vendor will also provide additional snaps of its iTraxx SovX Asia-Pacific Index, which provides a barometer of Asia sovereign risk, he adds.