DelphX Capital Markets Inc. is happy to announce the first institutional offering of its unique Collateralized Put Options (CPOs) and Collateralized Reference Notes (CRNs). The first transactions were made in collaboration with BNY Mellon, placement agent LPS Capital, and two institutional investor accounts. This successful procedure represents a significant achievement for DelphX, completing a multi-year development effort and kicking off the long-awaited commercialization phase.
DelphX has already established the procedure for issuance of its CPOs and CRNs with the performance of these initial transactions, demonstrating the significance of these solutions as part of institutional investor credit strategy. Throughout the protracted development process, the Company relied heavily on industry engagement and input, building considerable awareness within the fixed-income sector prior to launch. With this "go-live" set of transactions, DelphX will be able to pursue a complete product roll out through top bond dealers who have been closely tracking the development of these industry-first products. The company also expects substantial demand from financial companies that cannot or will not employ CDS or similar derivatives owing to investment requirements, but can use DelphX CPO and CRN products.
The debut corresponds with a significant growth in the volume of the closest rival financial vehicle, credit default swaps (CDS), which Tradeweb reported increased to US$811 billion in March 2022, up from US$330 billion in February 2022. This market's recent rise reflects a significant acceleration from 2021, when worldwide dealer banks' outstanding notionals of over-the-counter CDS increased by 5% to $8.8 trillion (as reported by the Bank for International Settlements). The DelphX product offerings are a timely new collection of risk mitigation and yield enhancement instruments that are fundamentally superior than CDS and other existing structured products.
"Because the fixed income market is experiencing unprecedented conditions, we are launching at a time when managers have a greater need for tools to manage both risk and yield." DelphX is in an exciting phase right now, with our revenue milestone approaching, a motivated pool of potential consumers eager to try our goods, and a highly leverageable, high-margin model aimed at an underserved market. With these characteristics, we may become profitable early in our roll-out phase, with margins comparable to SaaS (Software as a Service) or other transaction-oriented Fintech firms when we achieve scale. Importantly, this structure allows us to profit from increased transaction volume while avoiding the risks associated with the underlying bonds."
As a reminder, the DelphX CPO/CRN products are structured as private placement securities, making them suitable for managers who are unable or unable to employ regular derivatives or swaps. According to ISDA Global Credit Default Swaps Market Study, September 2019 and SIFMA US Corporate Bonds Statistics as of Q4 2021, the first target market is substantial, with over $15 trillion in Credit Default Swaps and US Investment Grade Corporate Bonds.
