DelphX Completes First CPO and CRN Issuance; Introduces Revolutionary Yield and Risk Tools for the Global Bond Market

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Jun 29, 2022
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TORONTO, June 9, 2022 /PRNewswire/ - DelphX Capital Markets Inc. (TSXV: DELX) (OTCQB: DPXCF) ("DelphX") is pleased to announce the first issuance of its proprietary Collateralized Put Options (CPOs) and Collateralized Reference Notes (CRNs), marking the first institutional issue of this new class of structured products. The inaugural transactions were completed in conjunction with custodian BNY Mellon, placement agent LPS Capital, and two institutional investor accounts. This successful process marks a major milestone for DelphX, finalizing a multi-year development effort and initiating the long-awaited commercialization phase.

With the success of these first transactions, DelphX has now proven the process for issuance of its CPOs and CRNs, validating the relevance of these solutions as part of institutional investor credit strategies. The Company relied on significant industry interaction and feedback during the lengthy development process, creating widespread awareness within the fixed-income community prior to launch. This "go-live" set of transactions will now enable DelphX to pursue a full product roll out via leading bond dealers who have been monitoring the development of these industry-first products. The Company also anticipates strong interest from financial entities who cannot or will not utilize CDS or similar derivatives due to their investment mandates, but are able to use DelphX CPO and CRN products.

The timing of the launch coincides with a sharp increase in transaction volume of the closest competing financial vehicle, credit default swaps (CDS), which Tradeweb reported rose to US$811 billion in March 2022, up from US$330 billion in February 2022. Recent growth in this market represents a major acceleration from 2021, when global dealer banks' outstanding notionals of over-the-counter CDS grew 5% to $8.8 trillion (as reported by the Bank for International Settlements). The DelphX product offerings represent a timely new set of risk mitigation and yield-enhancement securities fundamentally improved over CDS and other existing structured products.

"I would like to thank everyone who helped us bring to market what we believe are some of the most exciting new structured products in more than a decade," said DelphX CEO Patrick Wood. "Credit Default Swaps have been in the news a lot lately with world affairs forcing high profile segments of that market into disarray. So, our timing in offering a better alternative to these necessary but historically flawed CDS financial instruments could not be better. Another way to look at DelphX is as a kind of CDS 2.0, but with a vastly improved risk structure via full collateralization; a transparent, pre-defined default resolution process; and enhanced yield backed by the safety of U.S. treasuries."

"The fixed income space is experiencing conditions not seen in decades, so we are coming to market at a time when managers have a heightened need for tools to manage both risk and yield. This is an exciting time at DelphX, with our revenue stage now in sight, a motivated pool of potential customers ready to try our products, and a highly leverageable, high-margin model targeting an underserved market. With these attributes, we have the ability to become profitable early in our roll-out phase, with margins similar to SaaS (Software as a Service) or other transaction-oriented Fintech companies when we reach scale. Just as importantly, this structure enables us to benefit from enhanced transaction volume, without exposure to the risks of the underlying bonds."

As a reminder, the DelphX CPO/CRN products are structured as private placement securities, making them acceptable for use by managers who cannot, or will not, utilize traditional derivatives or swaps. The initial target market is significant, currently estimated to represent over $15 trillion in Credit Default Swaps and U.S. Investment Grade Corporate Bonds.

About DelphX Capital Markets Inc.

DelphX is a technology and financial services company focused on developing and distributing the next generation of structured products. Through its special purpose vehicle Quantem LLC, the Company enables fixed income dealers to offer new private placement securities that optimally transfer and diffuse credit risk, while allowing the enhancement of yield. The new DelphX securities will enable dealers and their qualified institutional investors (QIBs) accounts to competitively structure, sell and make markets in:

  • Collateralized put options (CPOs) that provide secured default protection for underlying corporate, municipal and sovereign securities;
  • Collateralized reference notes (CRNs) that enable credit investors to take on the default exposure of an underlying security in exchange for enhanced yield.

All CPOs and CRNs are fully collateralized and held in custody by BNY Mellon. CPOs and CRNs are proprietary products created and owned by DelphX Capital Markets.

For more information about DelphX, please visit www.delphx.com.

Forward-Looking Statements

This news release contains certain "forward-looking statements". Such forward-looking statements involve risks and uncertainties, both known and unknown, that may cause actual results or events to be materially different from those expressed or implied by such forward-looking statements, including but not limited to, business, economic and capital market conditions, regulatory uncertainties, and the demand for our products. The forward-looking statements in this news release are based on factors and assumptions regarding, among other things, the state of the capital markets, the ability of DelphX to successfully manage the risks inherent in pursuing business opportunities in the financial services industry, and the ability of DelphX to obtain qualified staff, equipment and services in a timely and cost-efficient manner to develop its business. Any forward-looking statement reflects information available to DelphX as of the date of this news release and, except as may be required by applicable laws, DelphX undertakes no intent or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or results or otherwise.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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SOURCE DelphX Capital Markets Inc.

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