The denouement of the Wizard of Oz involves the exposure of the feared, great, powerful and mighty totem as actually something not so scary - or at least not so great - after all.
In 2008, efforts to reduce notional outstanding amounts have been rewarded by a decrease of over $25 trillion in CDS notionals. This reflects a range of activities, including compression exercises run by Trioptima, Creditex and Markit. In addition, auctions and settlements of the recent series of credit events, including Fannie Mae, Freddie Mac and Lehman Brothers, have proceeded smoothly.
This year to date, Trioptima has reduced by $24.5 trillion the amount of CDS notional outstandings through its series of compression cycles (also known as tear-ups), which have included index, tranche and single-name trades. Trioptima’s triReduce Credit service has been in effect since 2005.
Additional efforts implemented by Creditex and Markit that focus on the single name space began as recently as September now account for $550 billion in compressions.
The Depository Trust & Clearing Corporation (DTCC) announced today that it will begin to publish aggregate market data from its Trade Information Warehouse (Warehouse), the worldwide central trade registry it maintains on credit derivatives. Starting Tuesday, November 4 and continuing weekly, DTCC will post on its website www.dtcc.com/derivserv the outstanding gross and net notional values (”stock” values) of credit default swap (CDS) contracts registered in the Warehouse for the top 1,000 underlying single-name reference entities and all indices, as well as certain aggregates of this data on a gross notional basis only. The data is intended to address market concerns about transparency.
