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Derivatives industry group the International Swaps and Derivatives Association (ISDA) is officially urging that the single-name (single company) credit default swap (CDS) roll protocol frequency be changed from a quarterly to a semiannual basis, officials say.
In a prepared statement, ISDA officials say the change is in response to market feedback and is aimed at “improving liquidity in the single-name CDS market.” Industry observers also add that cutting the frequency will provide relief in capital costs.
Under the proposed new schedule, single-name CDS transactions would “roll to a new ‘on-the-run’ contract on a semiannual, rather than quarterly, basis,” according to the ISDA statement.
ISDA officials add that the move will further align single-name CDS contracts with CDS index trades.
The implementation date is still under discussion, but ISDA officials have proposed a potential go-live date of December 20, 2015. All other features of the current standard single-name CDS will remain unchanged.
Officials at ISDA want the new standard schedule to:
- Improve liquidity around the new semiannual roll dates;
- Increase clearing of eligible single-name CDS transactions and encourage further buy-side participation;
- Improve the affordability of the product by reducing capital costs;
- Increase netting fungibility;
And improve the current market structure by further aligning single-name CDS contracts with CDS index transactions.
Need a Reprint?- Read More:
- CFTC,
- Dodd-Frank,
- OTC derivatives,
- compliance,
- credit default swaps,
- credit risk,
- data management,
- isda,
- operations
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