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The famously opaque $55 trillion credit default swap market is getting some more clarity. The industry's central registry, the Depository Trust & Clearing Corp., plans to begin disclosing aggregate market data on Nov. 4 to help dissuade criticism and rumor-mongering about the derivatives. Thereafter, the DTCC will release information on a weekly basis.
The data will include outstanding notional values at the end of each
week and data relating to the weekly confirmed trade volume.
Calls for more information about and regulation of the credit default swap market have increased since the collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc. brought to light hundreds of billions in potential exposure. The impact of the CDSs in both turned out to be overstated though. New York State is already claiming some authority to regulate the CDS market, and the industry is currently working to set up a central clearinghouse to provide more transparency into what the exposure of any one party may be and to pair offsetting trades in the event of a large default. CDSs work like an insurance policy against a debtor defaulting on payment of its bonds, allowing the bondholders to claim that the risk from their bond holdings has been transferred although they still hold the asset. The disappearance of large issuers like Lehman or American Insurance Group Inc. left open the possibility that buyers of the contracts would be left with billions of additional risk on their books, possibly causing billions more in forced selling. - George White See DTCC press release See Dealscape post CDS clearinghouse See Dealscape post on Lehman swaps See Dealscape post on NYS regulation Categories Deal Video
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