Credit Default Swaps Market Outstandings Shrink As Dealers Tear Up Offsetting Agreements
Global Finance › Vol. 22 Nbr. 11, December 2008
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Summary
Participants in the over-the-counter credit default swaps (CDS) market have sharply reduced the notional amount of CDS contracts outstanding this year through a series of portfolio compression cycles, also known as tear-ups. The decrease in notional outstanding CDS amounts in 2008 reflects a range of activities, including compression exercises run by TriOptima, Creditex and Markit, says the International Swaps and Derivatives Association. Meanwhile, the Depository Trust & Clearing Corporation (DTCC) says its central registry for the CDS market, known as the Trade Information Warehouse, has successfully completed the automated credit-event processing and settlement of over-the-counter CDS contracts related to the bankruptcy of Lehman Brothers. To help increase transparency in the CDS market, the DTCC last month began releasing weekly data on the top 1,000 credit default swaps, including the gross amount and a net figure that excludes offsetting trades between two parties. Last month the DTCC and LCH.Clearnet, the biggest independent central counterparty group in Europe, announced plans to merge.
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Credit Default Swaps Market Outstandings Shrink As Dealers Tear Up Offsetting Agreements
Participants in the over-the-counter credit default swaps (CDS) market have sharply reduced the notional amount of CDS contracts outstanding this year through a series of portfolio compression cycles, also known as tear-ups.The notional outstanding volume of credit derivatives was $54.6 trillion at the end of June, down from $62.3 trillion at the end of last year, according to the International Swaps and Derivatives Association (ISDA).
"This reduction in notionals is major progress by anyone's standards," says Eraj Shirvani, ISDA chairman and co-hea...See the full content of this document
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