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Credit derivatives clearing catches on 

August 25, 2015

Mike Kentz, Reuters

Credit investors are buying into clearing for single-name credit default swaps as a cure for the ailing market - even though it is sometimes more expensive than existing bilateral execution methods.

The Intercontinental Exchange has signed up 21 new buyside firms to its single-name CDS clearing offering this year - more than doubling the total buyside participation to 39 firms - via a lobbying effort that includes discounts for buyside firms that back-load existing swaps into clearing between June and December.

The exchange and other market participants argue that clearing - in conjunction with other market-driven initiatives - will revive the once-thriving market whose outstanding volumes have dropped from US$1.5trn in 2008 to US$651bn today, according to Isda.

"Of all the market initiatives under way I think wider adoption of CDS clearing will have the greatest positive impact to the product's liquidity," said Jason Brauth, head of US investment grade, high-yield, and index credit trading at Goldman Sachs.

Read more: Reuters

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