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Fed Planning Credit Default Swap Marketplace

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Charlie Gasparino
Monday, Oct 6, 2008

Officials at the Federal Reserve plan to meet with top executives from two commodities exchanges in an effort to create a new marketplace for credit default swaps, one of the most important, controversial and opaque securities traded on the Wall Street, CNBC has learned.

The meeting, scheduled to be held as early as Tuesday of this week at the headquarters of the New York Fed, is expected to clear the way for the creation of a new clearing house, or exchange, where CDSs can be traded with more transparency and with a degree of government oversight.

At the moment CDSs are traded in the over-the-counter market, where traders buy and sell the securities among themselves.

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The effort by the Fed is designed to create a centralized market place where CDSs can be traded.

People close to the talks say that the new exchange could be up and running in a matter of weeks.

  • A d v e r t i s e m e n t

Credit default swaps are essentially insurance policies against the possibility that a company might default on its debt. The buyer of the CDS pays a premium to the seller for their protection.

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This article was posted: Monday, October 6, 2008 at 12:03 pm

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