Credit Derivatives Market Shrinks 12% as Dealers Reduce Trades

[gopbuster]

Source: Bloomberg

Credit Derivatives Market Shrinks 12% as Dealers Reduce Trades

By Shannon D. Harrington

Sept. 25 (Bloomberg) -- Credit-default swap dealers reduced the volume of outstanding contracts for the first time amid efforts to reduce risks in a market used to hedge against bond losses and speculate on corporate creditworthiness.

The volume of outstanding trades fell to $54.6 trillion from $62 trillion in the first half, the International Swaps and Derivatives Association said in a statement yesterday. It was the first decline since ISDA started surveying traders in 2001.

``This decrease primarily reflects the industry's efforts to reduce risk by tearing up economically offsetting transactions and demonstrates the industry's ongoing commitment to reduce risk and enhance operational efficiency,'' ISDA Chief Executive Officer Robert Pickel said in the statement. ``We expect to see more effects of this over time.''

Outstanding contracts had grown 100-fold over the past seven years as insurance companies, hedge funds and investors used them to speculate on corporate creditworthiness. Traders last year rushed to unwind trades or hedge against losses as credit markets locked up amid the worst U.S. housing slump since the Great Depression.



Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aYdE4_qKZF94&refer=home

[gopbuster]

1. regulation is a comin' n/t

[bperci108]

5. At this point, it won't do anything but prolong the inevitable.

Wall Street has been turned into a giant Reganomics casino making bets on the success of bets; IOW it's a house of cards. Duhbya and his evil spawn have been printing money as fast as the presses will run and they've devalued our Dollar by almost 50%.


For the common good and the long-term health of the American economy: The fraudulent, bogus Shadow Banking System must die.



Burn baby burn. :evilgrin:

[olddad56]

11. well said. the ball game is over, the players have left the building...

but the fans still in their seats. They are being lead to believe it is only halftime and our team can still rally from this huge deficit. When they finally leave the stadium, they will find that their cars have been stolen.

[fedsron2us]

2. Note to Congress from Casino

Gambling system working well. Please send more money.

God this is the oldest scam in the betting world.

[Douglas Carpenter]

3. this is VERY BIG!! It is hard to overstate the effects of a down turn in available credit

[Phoebe Loosinhouse]

4. So, they were able to just "tear up" economically offsetting transactions

Interesting. Veerrrry interesting.

If I were the investigators - I would empty the trash cans and look at these torn-up deals FIRST! These are the ones that probably don't pass the smell test and perhaps they're offloading them as quickly as possible.

[WriteDown]

7. Huh?

You do realize that they quote was metaphoric. These purchases and trades are electronic. They are long gone.

[amandabeech]

9. There may be some hard drives or storage around for record-keeping purposes.

You'd be surprised what turns up in the discovery process for lawsuits criminal and civil.

While you might not be able to find everything, I think that there will be enough out there to get a good sense on what is now and has been done.

Now that the FBI is in the act, subpeonas requing the maintenance of records may go out soon.

[WriteDown]

10. Forensic accounting would be needed...

you are talking about years if not decades of research. Not against the idea, but being realistic.

[amandabeech]

12. Yes, that will be done, too, but not decades worth,

There will also be an incredible amount of work on legal side looking for clues to fraud.

It will take two or three years to develop the evicence on both legal and accounting sides.

More than that, and the charges may be dropped or settled for not much due to an inability to sustain the effort.

[Demeter]

6. They Should Be Illegal

or very tightly controlled.

[WriteDown]

8. What should be illegal? n/t