Why did it take a financial crisis and regulatory whipping to bring the CDS market to embrace central counterparty clearing? Some people in the market clearly thought change would cost them money. Either they were right, and it will, or they were wrong, and the market is about to get more efficient. Vishala Sri-Pathma tries to find out which it is.
Intercontinental Exchange endured months of work and negotiations to reach the point on March 9 when it could put its efforts to lead central counterparty clearing of credit derivatives into high gear. The exchange was delighted to clear $7bn of CDS in its first few days of operation.
However, even the best laid plans are no guarantee that anything is going to work out in what is an entirely new initiative for this huge market, whose notional principal is now estimated at around $28tr.
As Jeff Sprecher, ICE’s chief...