The International Swaps and Derivatives Association, Inc. (ISDA) today made the following comment on a draft bill proposed by House of Representatives Agriculture Committee Chairman Collin Peterson that would, among other things, prohibit credit default swap trading in cases where investors do not own the underlying bonds:
"This bill would increase the cost and reduce the availability of essential risk management tools while failing to address the true causes of the credit crisis," said Eraj Shirvani, ISDA chairman and head of European and Pacific Credit Sales and Trading at Credit Suisse.
"Throughout the crisis, credit default swaps have remained available and liquid. They have been the only means of hedging credit exposures or expressing a view at a critical time for the industry. Impairing their use would be counterproductive to efforts to return the credit markets to a healthy, functioning state."