I agree. Although I agree that central clearing of CDS's is a big step in the right direction, why should CME firms (and by extension, the traders who use them) suddenly be on the hook for the toxic garbage of CDS's? Separating the clearing of CDS's is a much better way to go, in my opinion.
The DTCC implies on their website that they have been getting credit default swaps under control since 2006 and that the total size outstanding is overstated by a factor of two. http://www.dtcc.com/news/press/releases/2008/tiw.php?lpos=hp_slot2&lid=oct08_cds_misconceptions ========================= While that is somewhat encouraging, Patrick Byrne, CEO of Overstock.com, doesn't have much good to say about the DTCC claiming millions of Failure to Deliver problem exist. Maybe even Refco toxic sludge. http://www.businessjive.com/ I don't have enough background to develop a feel for what the real story is here, but the SEC FOIA docs in his animated presentation paint a harsh picture. I sure as heck would like to know the truth on the Failure To Deliver issue. Thoughts? T200
I'll picket outside the BoT building here in Chicago before we allow CME to jeopardize our liveliehoods & our whole financial system! I pray ICE wins the bid because their proposal makes more sense. A seperate clearing house benefits everyone! CDS are junk instruments & while they should be regulated, they should not be mixed with futures trading.
You really do not have to worry - the ICE proposal is likely to garner the most support from the market makers (IBs) and has the advantage of being a Fed governed entity. The volume will likely go there I think. That being said, I think there is a lot of misinformation out there about CDS. I really do not see what is so "toxic" about the market other than the hack job many in the media have done. Yes, it is a different product than say, IR or FX derivatives, but the firms involved are the same. And IR/FX dwarfs the (inflated) size of the CDS notional outstanding anyway. In my opinion, the OTC market is flawed anyway - a direct result of large IB profits garnered from the combination of opaque markets and the ability to provide leverage to entities on an individual basis without much regard to what is actually being traded. Just my $0.02.