IDX Capital, an interdealer broker of credit default swaps, issued the following statement on the current debate to institute certain reforms to the credit default swap (CDS) market.
Jamie Cawley, ceo of IDX Capital, stated, "IDX stands ready to fully embrace any market led effort that would result in greater liquidity, enhanced stability and increased trading transparency in the credit derivative marketplace. To achieve this goal, IDX supports live screens, centralized clearing and thoroughly crafted regulatory policies.
Live screens and real-time pricing would bring immediate benefits to the New York CDS marketplace. They deliver unparalleled transparency as prices and trades can be disseminated instantly and equally to all market participants. In addition, they ensure client confidentiality, fair dealing and optimal execution as ‘one size fits all.’
By eradicating trade ‘double entry,’ live screens also streamline and automate the settlement of trades, an issue that has until recently plagued our market and hampered its evolution."
In a Greenwich Associates study conducted in August, over 75% of institutional respondents agreed that the counterparty risk issue in the credit default swap market is the single largest threat to the stability of global financial markets. Recent events and the current financial crisis would certainly support this belief.
In response, IDX Capital stands ready to embrace and work with any inclusive and properly capitalized CDS central clearing initiative that mitigates counterparty risk and better facilitates market liquidity.
Cawley concluded, "Our market must accept regulation. Well thought out and mitered regulation can only further legitimize our market, ensure fair dealing and help us to deliver greater transparency. IDX Capital stands ready to proactively work with regulatory entities in this country and others, trade associations, and market participants to ensure that any such regulatory proposal both properly balances the market need with the public good."