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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (70697)	11/4/2008 7:20:36 AM
From: Snowshoe	1 Recommendation Respond to of 74559

Here's a nice little example of the epic de-leveraging and re-regulating that we're seeing... New Data Will Report Credit Swaps Tied to Bonds online.wsj.com By SERENA NG and EMILY BARRETT NOVEMBER 1, 2008 Starting in the coming week, the public will get a glimpse into a slice of the credit-default-swap market that hasn't been visible even to most investors that trade these insurance-like contracts. The Depository Trust & Clearing Corp. said it will publish weekly data showing the volume of outstanding credit-default swaps tied to many individual bonds and loans. Starting Tuesday, it will release information on its Web site for 1,000 debt issuers -- such as companies and countries -- that swaps have been written on. The move is part of a broad effort by large banks and other market participants to increase transparency and reduce risk in the credit-default-swap market. A lack of information about swap volumes on individual bonds has contributed to investor worries about this market in recent weeks. On Friday, industry players released a letter to the Federal Reserve Bank of New York, pledging to do more to reduce volumes of outstanding swaps and to start clearing trades through a central clearinghouse by November or December. Credit-default swaps are contracts that trade directly between firms and provide protection against bond and loan defaults. As of June 30, such swaps had been written on $55 trillion worth of debt, and until recently that number had been growing exponentially, causing concern among regulators that some players in the market couldn't fully gauge their risk exposures. Unlike stocks and bonds, there isn't a fixed supply of swaps outstanding, and dealers continually create new contracts with each other or with their customers such as hedge funds. In a statement Friday, the New York Fed said firms have been instructed to reduce outstanding trades by "tearing up," or canceling, contracts that effectively offset each other. In the year to date, these tear-ups eliminated over $24 trillion in trades, with around $17 trillion occurring in the first half. Wall Street players also agreed on new targets to log credit-default-swap trades more swiftly and to broaden that effort across the derivatives asset class. The DTCC's statistics already have helped dispel some fears surrounding credit-default swaps, such as the ability of financial institutions and hedge funds to make swap payouts tied to defaulted Lehman Brothers bonds. Estimates of the value of contracts on the failed investment bank ran as high as $400 billion. The DTCC's numbers showed that the volumes outstanding were closer to $70 billion and the amount that ultimately changed hands to settle the contracts was a fraction of that.