Posts tagged 'ISDA'

One hundred and one pains in the SNS for the CDS market [update]

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Mar 11 17:25 | Comment |

The nationalisation of the fourth largest bank in the Netherlands is proving to be a pain for the credit derivatives market. It’s only by virtue of the small number of contracts outstanding that referenced SNS Bank that this hasn’t been making more headlines and causing more consternation.

The Isda Determinations Committee has already declared that the expropriation of the subordinated debt of the bank was a restructuring credit event, and that there might be some auctions to determine payouts under the swaps. But it looks like that result of the auctions could prove a bit farcical, with buyers of protection walking away with very little compensation for the total loss experienced by subordinated debt holders. Read more

Isda committee decision on SNS Bank CDS weird or what?

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Feb 13 18:22 | Comment |

We’re confused about the restructuring credit event that the Isda determinations committee voted for on Wednesday. It took them three meetings to do it, and Bank of America Merrill Lynch doesn’t agree, but there you go.

Oh, and the Q&A document that Isda published about CDS written on Greece has a line that appears to be in contradiction to decision, but there you go… Read more

Isda nationalisation of SNS Reaal a credit event? Yes it is

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Feb 13 14:39 | Comment |

SNS Reaal’s sub expropriation was a restructuring credit event after all, according to 14 of the 15 Isda determinations committee members on Wednesday:

 Read more

The non-precedent setting, own-law making, secretive CDS committee is having a seriously bad month

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Feb 13 11:47 | Comment |

Oh boo, the committee that decides on whether credit default swap contracts should payout appears to be having trouble reaching a conclusion about whether the nationalisation of SNS Bank counts as a “credit event”. While the quantity of swaps that hang in the balance is teeny tiny, the issue itself is a big deal because it reveals some of the problems that might crop up in future bank rescues and bail-ins of debt while demonstrating yet again that CDS don’t appear to do what a reasonable person would think they do. Read more

Oh look the CDS market isn’t working again

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Feb 11 19:11 | Comment |

There can’t be many credit default swaps written on freshly nationalised SNS Bank. It isn’t among the publicly reported top 1000 single-entity CDS published by DTCC.

Nonetheless the question of whether the Dutch government’s expropriation of SNS subordinated debt constitutes a credit event, triggering payouts on the derivatives, is being debated on Tuesday by the Isda Determinations Committee, which serves as the ultimately arbiter in such cases.

By which we mean, they are debating it again — they decided the first time around to defer the question to get more information or something.

But why should anyone care about some contract that so few parties have an interest in?

Some possibilities below. Mentally circle any that apply. Read more

Credit derivative crowdsourcing #fail

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Jun 26 2012 16:01 | Comment |

The credit derivatives industry has gone through the mother of all clean-ups over the last four years. It has standardised. The build-up of redundant contracts has been kept down. Hell, people even know which counterparties they are facing these days!

To make it even easier, there are quite specific rules to deal with various mechanics. Is it time to give the industry a pat on the back for a job well done? Read more

What position transparency?

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| May 12 2012 00:07 | Comment |

“Synthetic credit portfolio”. That’s the book where the $2bn in mark-to-market losses took place for JP Morgan, according to an announcement made on Thursday. A result which has now cost them a their AA- rating from Fitch and landed them on negative outlook with S&P, as announced late on Friday.

FT Alphaville has analysed the credit trades that might be in that portfolio, in an attempt to reason through what may have gone on. The fact, however, remains that we know precious little. Why is that? Is this acceptable that after the financial crisis that this can happen to a bank, let alone a systemically important one like JP Morgan? Read more

Ok guys, hands up who booked the weird Greece CDS trades…

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Mar 09 2012 15:30 | Comment |

[Twiddles thumbs, waits for Isda to announce whether there's been a credit event on Greece...]

There’s a bit of an oddity in the pool of CDS trades on Greece. To understand it, we need to explain a bit to you about credit events, auctions, and the trading conventions on them. What it boils down to, is that it looks like someone booked some trades that go against the norm. Read more

Greek PSI — the analyst reaction

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Mar 09 2012 10:28 | Comment |

An initial roundup of the PSI commentary out this Friday morning.

First off Standard Chartered’s Sarah Hewin, who thinks Isda might call a credit event: Read more

Shhh! Isda cabal is acting in a predictable way.

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Mar 08 2012 17:26 | Comment |

What, not dramatic enough for you?

Well, then, how about an 18-page list of potentially deliverable bonds? This could come in useful if — and this is only a hypothetical, you understand — the Isda Determinations Committee were to be requested to rule on whether a restructuring credit event had occurred with reference to Greece because of the use of collective action clauses to force holdout creditors into the bond swap. Read more

Did your grandma buy Greece CDS or what?

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Mar 02 2012 12:54 | Comment |

FT Alphaville is starting to feel a bit bemused at the level of outrage expressed around town the globe on the behalf of those poor buyers of credit default swap protection on Greece. But, here’s a question: are they deserving of your pity? And who are they?

The situation at present is that there have been a couple of attempts to get the Isda Determinations Committee to declare a credit event. After a credit event is triggered, and it looks likely that it will be next week if collective action clauses are used in order to get maximum participation in the Greek bond swap, there will be an auction, again organised among dealers coordinated by Isda. Read more

ISDA: the “S” seems to stand for “sneer”

Paul Murphy is the founding editor of FT Alphaville.

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| Mar 02 2012 08:53 | Comment |

We’ve been curious for a while about the media.comment blog at the International Swaps and Derivatives Association, which declares its mission thus:

media.comment addresses mainstream business and financial media coverage of the derivatives industry. Our hope is that media.comment will help lead to a more informed debate and understanding of the OTC derivatives markets for all our audiences. Reader thoughts and ideas are welcome. Read more

Greece CDS: trigger sad

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Mar 01 2012 13:55 | Comment |

Shhhh! Be very, very quiet. The Isda Determinations Committee has been meeting to decide whether there’s been a restructuring Credit Event that would trigger payouts on CDS referencing Greece and we don’t want to spook them.

Or as the WSJ put it: Read more

Greece CDS: trigger happy

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Mar 01 2012 10:00 | Comment |

Jeez, guys, look, there’s going to be a credit event that triggers Greece CDS, ok? Or, at least, it seems highly likely. So, take a chill pill.

What, you don’t want to? Instead you want to submit another request to the Isda Determinations Committee to try to trigger the contracts? Fine, have it your way (click to expand): Read more

Isda decides to decide on Greek credit event

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Feb 28 2012 21:01 | Comment |

Stand by…

ISDA Determinations Committee Accepts Question
Related to a Potential Hellenic Republic Credit Event Read more

Isda Greece credit event around here?

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

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| Feb 27 2012 18:40 | Comment |

Has Greece CDS been triggered? The question’s finally been posed to Isda’s determination committee and is currently pending:

 Read more

When a derivatives counterparty leaves the euro…

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Jan 23 2012 12:54 | Comment |

Law firm Clifford Chance must be tired of fielding questions about what would happen to derivatives contracts should one’s eurozone counterparty exit the single-currency. So much so that they’ve put a document together covering 20 of what we imagine have been the most frequently asked questions.

FT Alphaville has waded through the legal mists, guided by Clifford Chance, to give you a bit more pedantic detail than “it depends”. Read more

Greek lessons for Portugal

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Jan 19 2012 13:37 | Comment |

It appears that the “voluntary” Greek bond swap might finally come to an end.

Time then to spare a thought for the derivative that drove the need to draft the damn thing so gently in the first place. Ladies and gentlemen, FT Alphaville gives you the incredible shrinking market for credit default swap contracts written on Greece! Read more

Why do they exist?

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Jan 05 2012 16:53 | Comment |

Credit event auctions are the means by which final payouts on credit default swap contracts are calculated. The importance of such auctions will increase as more and more defaults occur in the face of a global economic slowdown.

To the extent that CDS are used to hedge, rather than speculate, the outcomes of these auctions will dictate how effective the hedge has been. Read more

Do you believe in netting? — Part 2

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Dec 21 2011 13:25 | Comment |

In Part one, FT Alphaville asked whether there was reason to doubt the netted derivatives exposures reported by banks. Here, we discuss how netting works (or doesn’t, ahem) when counterparties collapse.

Valuing swaps when the world is crumbling Read more

Do you believe in netting? — Part 1

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Dec 21 2011 13:07 | Comment |

On Friday, Jeffrey Snider of Atlantic Capital Management argued that finance now exists for its own exclusive benefit. The thrust of his argument is that derivatives have allowed banks to escape the bounds of actual cash assets and the real economy.

He introduced his argument by dissecting Bank of America’s derivatives disclosure, pointing out the distance between the net derivative asset that is reported ($79bn) and the market value of said asset before netting ($2,172bn). From there he goes on to marvel at the size of the derivatives market, and question whether there’s any good reason for it to be so big. Conclusion being as above: it’s so big that the link to the real economy is more or less gone. Read more

More on the conflicted Isda committee

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Dec 14 2011 17:10 | Comment |

The International Swaps and Derivatives Association has a list of journalists who’ve been naughty or nice. They write about them on their Media Comment blog here.

Given FT Alphaville’s previous post about the Isda-organised Determinations Committee, which rules on behalf of the entire industry on whether credit derivatives will pay out, we’d like to make a few more points to address at least some of the possible counter-arguments. (To be clear: the quote boxes below display our versions of putative counter-arguments.) Read more

The conflicted Isda committee

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Dec 14 2011 16:55 | Comment |

Imagine playing a game where you bet on the outcome of a certain event. Most of the time the final outcome is unambiguous: you play, and afterwards, it’s clear whether you won or you lost. But every now and then, the result is hazy. Did the ball go into the goal? Was there a handball? Did he reach base?

This is usually where a referee steps in to decide. Read more

RBS fined $1.9m after CDS mistake

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Nov 30 2011 05:40 | Comment |

Royal Bank of Scotland was penalised $1.9m on Tuesday, after it placed below-market prices in an auction among 13 credit default swap dealers, reports the FT. The auction was held to ascertain the value of debt issued by Dynegy, which recently filed for bankruptcy. RBS was assessed the charge after its offer price on $5m of Dynegy bonds was 31.5 basis points or 31.5 cents on the dollar for the debt. Other banks provided offer prices ranging from 69.63bp to 72bp, according to the results published on CreditFixings.com, a website run by Creditex and Markit Group, who administered the auction on behalf of the International Swaps and Derivatives Association. Read more

Fitch backs sovereign CDS reform

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Nov 28 2011 03:48 | Comment |

Fitch Ratings has backed calls to reform the sovereign CDS market following the voluntary deal for exchanging Greek bonds proposed last month, reports the FT. The ratings agency says the voluntary agreement by bondholders on Greek sovereign debt, which avoided triggering a credit event, means the settlement of CDS on sovereign countries requires clarification. “It would seem that the use of the restructuring credit event generally and the nature of the language employed should probably be revisited,” the agency says in a report to be released on Monday.

  Read more

99 per cent of credit derivatives are recorded by DTCC… sort of

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Nov 21 2011 18:00 | Comment |

The Depository Trust and Clearing Corporation, and representatives of trade association Isda, have stated on several occasions that 98 per cent of all credit derivatives outstanding are recorded in the Trade Information Warehouse that the former organisation runs. For an initiative that is all about transparency, it struck us as odd that it’s so difficult to find out how they determine that number.

FT Alphaville’s theory, outlined on Friday, was that it came from some of the surveys which measure the overall size of the credit derivatives market. This turned out not to be true. Our readers helpfully provided some of their own theories too. Read more

98 per cent of credit derivatives are recorded by DTCC… right?

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Nov 18 2011 19:50 | Comment |

It’s a claim that is often made by representatives of the International Swaps and Derivatives Association and of The Depository Trust and Clearing Corporation that 98 per cent of all credit derivatives outstanding are recorded in the latter organisation’s Trade Information Warehouse.

It’s a comfort to know that data on nearly all such derivatives are stored in a single place, where the public can glance into the normally opaque over-the-counter world and regulators can have a proper dig if they want to. Read more

Is(da) derivatives industry misunderstood?

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Nov 11 2011 17:40 | Comment |

The International Swaps and Derivatives Association has been rather busy lately. In case you haven’t noticed, they’ve been on the public relations offensive, taking notes and calling out what they see as bad reporting, or even bad semantics.

They’ve also had a rather pivotal change in personnel. And this Tuesday they announced their latest study on losses that banks took from exposures to monolines. Read more

EFSF CDS, not your standard credit derivative

| Nov 08 2011 16:03 | Comment |

After getting their latest bond offering off the ground at last – the EFSF has circulated a document to help everyone work out how to leverage it.

(Click for full document) Read more

Isda has a bone to pick with you (and so can we!)

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Nov 03 2011 12:40 | Comment |

Alright, you lot, stop it with the ridiculous CDS posts. Stop it! We mean it. And Isda means it too:

It’s hard to overstate the amount of nonsensical chatter on credit default swaps (CDS) in the past few days. Read more

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