CSFB to Target High-Margin Credit Trades
Derivatives Week, Vol. IX, No. 30, July 24, 2000

Credit Suisse First Boston plans to leverage off its recent investment in Internet credit derivatives platform Creditex by channeling all its single-name credit default swap business through the firm's web site and using its own sales force to target higher-margin products. Sanjeev Gupta, head of credit derivatives at CSFB in New York, said plain vanilla derivatives account for 20% of the firm's credit derivatives business. The move will not result in a reduction of CSFB's sales team.

Gupta said Internet platforms, such as Creditex, are far more transparent and reflect the market more accurately than individual banks' web sites. He is surprised that other firms that have invested in Creditex, such as Morgan Stanley Dean Witter, have not made the same commitment to put plain vanilla trades through the platform. Officials at MSDW did not return calls.

Gupta predicts that the notional size of the credit derivatives market will increase to between USD8 trillion and USD10 trillion from about USD1 trillion over the next five years. He thinks that most of that increase will be in vanilla credit default swaps. The bank has bought into Creditex now to increase its volume of vanilla products while keeping the same staffing levels on tailored products. Gupta estimated that within the next few years vanilla products would increase to 50% of the department's business.

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