Creditflux Newsletter

Among the constant hiring and firing, leaving and joining in the credit business, news of one departure caught Wolseley’s attention because it marks the end of an era.

Sunil Hirani, founder and chief executive of Creditex has resigned from the company he sold to the Intercontinental Exchange in 2008. When Hirani and John McEvoy established Creditex in 1999, with backing from Deutsche Bank and JP Morgan, it was a cool company with a plan to broker cool credit default swaps over the even cooler internet.

Dotcom bust reduced it to just another broker and put intolerable strain on the founding partnership. Tired of compromise, McEvoy demanded that the board choose between the two founders, and rather to its surprise, it chose the esoteric and sometimes erratic Hirani.

It was only with the departure of McEvoy that Creditex began to demonstrate the talent for rapid technological innovation in the credit derivative market that took it from irrelevance to predominance in a few years. Creditex developed the first real electronic trading platform for credit derivatives, which did much to stimulate index trading volumes.

That was followed by bulk auction functionality, end of day price fixings, credit event auctions, straight through processing and net delta matching. Hirani and his team listened to what traders wanted, and delivered it. The CDS market could not have grown as fast as it did without the profusion of innovation delivered by Creditex.

Listening to traders and regulators worrying about counterparty credit exposure, Hirani recognised that the next big challenge for our market was to deliver central clearing, and in August 2008, before the failure of Lehman, he closed the sale of his company to exchange and clearing house specialist ICE. Powered by Creditex, ICE has delivered clearing capability for the credit market, just in time for the regulators (if not in time to mitigate some of the aspects of the crunch).

This job done, perhaps it is understandable that Hirani has chosen to call it a day. He wouldn’t be the first CEO to find corporate life inside a new enlarged organisation stuffy and bureaucratic.

But whither ICE? Respected ICE CEO Jeff Sprecher had the vision to recognise that Creditex was the key to taking ICE from nowhere to a market leader in credit, stealing a march on his old rival CME. But without Hirani’s domain expertise, who at ICE understands credit? The answer to this question matters. ICE is now a crucial part of our market’s infrastructure. Alternative credit clearing offerings from the CME and Eurex trail ICE precisely because they lack the domain expertise that Hirani brought.

Wolseley is pleased to note that Hirani remains an advisor to ICE, and that ICE’s chief strategy officer, Mazy Dar, and other key former Creditex staff remain. But regulators and market participants should be worried by the lack of knowledge of credit on the ICE board. Much of ICE’s experience of clearing energy and agricultural products is immediately applicable to credit, and the close links with regulators in the US and Europe are invaluable, but they don’t help you understand points up front.

Hirani’s departure may mark the end of a period of frantic technological innovation. Maybe we are set for more modest growth, with innovation focused on improving robustness and reporting. Maybe, but Wolseley doesn’t think so.

So, thank you Sunil Hirani. Now we need a new Hirani.

Wolseley is a leading practitioner in the credit market. Feedback is welcome at wolseley@creditflux.com