BIS Data shows most CDS trades not be suitable for trading on a SEF


The Bank of International Settlements (BIS) today released data covering outstanding positions in the global OTC Derivatives markets.

Whilst overall outstanding OTC positions are down some 4% to $583 trillion, gross market value of existing OTC contracts rose by 15% to $25 trillion.

Notional amounts of Credit Default Swaps (CDS) outstanding declined for the 5th semiannual period (due to terminations of existing contracts).

Interesting to note that the BIS has for the first time included Central Counterparties (CCP) in the breakdown of outstanding contracts by counterparty for CDS positions. Although further reading shows that CCP accounted for only 11% of outstanding CDS positions. This relatively low figure reflecting the “non-standard” nature of much of the CDS positions captured by the BIS survey (see section 3.2 on page 6 of report).

So, if the vast majority of CDS positions are non-standard, and thus not suitable for clearing by CCP, does that not also imply that the vast majority of CDS trades would  therefore also be exempt from having to trade on a ‘SEF’?

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