(Bloomberg) -- Royal Bank of Canada is expanding its credit derivatives trading business in the US and Europe, betting that multibillion-dollar fundraising for artificial intelligence will fuel demand for hedging products.
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Canada's largest lender started making markets for US dollar-denominated single-name credit default swaps in January and plans on eventually adding euro-denominated swaps, according to Santosh Sateesh, global head of credit derivatives trading at RBC. Sateesh, a veteran CDS trader who began his career in credit at Lehman Brothers in 2007, is also planning more hires in coming months as he expands in euro and other non-dollar markets.
The bank boosted its credit derivatives franchise in 2022 when it brought in Sateesh from Credit Suisse Group AG and started trading CDS indexes — or CDX — the same year. The desk has since added CDX options and CDS indexes tied to European companies and is now building its single-name CDS trading capabilities as it looks to expands its market-making business.
"We want to be a full suite, tier-one liquidity provider in this space," New York-based Sateesh said in an interview. He leads a team of six traders and two sales people.
The expansion coincides with record debt issuance from Big Tech companies to help finance artificial intelligence projects, prompting strong demand for CDS as Wall Street seeks ways to hedge against potential losses or speculate on the creditworthiness of hyperscalers.
That's helping attract interest from clients looking for cheaper ways to hedge or take advantage of relative value across asset classes, said Sateesh. Years-long efforts to overhaul and streamline the credit derivatives market are also boosting volumes, he added. RBC said its single-name CDS trading volumes for June almost quadrupled the year-to-date volumes while its credit index options volumes have doubled year-over-year.
"Volumes have increased when volatility increases and that speaks to the strength of the product," said Sateesh.
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CDS 'Resurgence'
To be sure, Wall Street's biggest banks have far larger balance sheets than most foreign competitors such as RBC, allowing them to trade more swaps each day and capture more business. RBC said its performance during periods of elevated volatility, including in April 2025, has been a key differentiator and growth driver.