A bill that market participants say could all but kill the credit default swap market has been introduced to Congress by Representative Collin Peterson (Democrat, Minnesota), chairman of the House Agriculture Committee.
The updated draft of Peterson’s bill would ban institutions from buying protection using CDS contracts unless they owned the underlying bonds.
Such a provision would severely curtail the $28tr CDS market, and specialists say it could almost kill it, because roughly 80% of CDS are traded by firms that do not own...