Single name Credit Default Swap (CDS) traders have not had a good time of it. Late last year, Deutsche Bank stopped trading most single name credit default swaps, hammering a final nail into a coffin that had been closing since the financial crisis of 2008. If you’re a single name CDS trader, transmutation has been the name of the game.
“CDS guys have been losing their jobs and trying to invent themselves for years,” says one ex-CDS headhunter, who now works in an entirely different sector. “Some moved into simple credit trading. Others moved into other products like equity derivatives or FX, others have moved to hedge funds.” Another credit-focused headhunter, also speaking anonymously, says former CDS traders have moved into new ‘sexy’ areas like XVA trading. “They’re out there,” he says. “If I needed to find a single name CDS trader, I could call several of them up tomorrow.”
That’s fortunate, because it seems CDS trading may yet make a comeback. “Single name CDS offers a clean and efficient way to express credit exposure which the current market structure of the underlying secondary corporate bond market doesn’t afford us,” says Supurna VedBrat, co-head of electronic trading and market structure at BlackRock.
In simple language, the implication is that a return to single name CDS trading will allow funds to hedge against corporate bonds more effectively, thereby helping to assuage concerns about a lack of liquidity in that market.
Some single name CDS professionals do appear to have moved into entirely different areas, however. Raj Narayan, an Oxford University graduate and former single name CDS trader at Lloyds Banking Group, is now working with Business in the Community, a responsible business network founded by the Prince of Wales. Jasper Tray, a former CDS broker at ICAP is now a ‘food entrepreneur.’ And Shai Shemesh, a former head of high yield and CDS trading at Deutsche Bank is now managing director of Shemesh Automation, a business which – among other things – devises ‘packaging solutions’ for wet wipes.