Bankruptcy

Credit Default Swaps & Regulation

By Stephen Lubben

The administration has proposed new regulations that would move a substantial part of the extant CDS market onto exchanges and force clearing through central clearing agents.  This is fine, as far as it goes. The clearing agents will provide regulators with a window into this presently opaque market.

But what about the problem of offshoring?  That is, how do we know the market will continue in the same form?  And will the regulations allow for oversight of trading that might be moved to a foreign subsidiary? The proposal calls for reporting obligations for trades not cleared through a central agent -- the key will be to make sure that the reporting requirements are robust and extend to the affiliates of the regulated entity.

And what about the overbroad "safe harbors" in the Bankruptcy Code?

Full post as published by Credit Slips on May 14, 2009 (boomark / email).