How Might Increased Transparency Affect the CDS Market?

Chen, Kathryn; Fleming, Michael J.; Jackson, John; Li, Ada; Sarkar, Asani

Discussion Paper

How Might Increased Transparency Affect the CDS Market?

Abstract: The credit default swap (CDS) market has grown rapidly since the asset class was developed in the 1990s. In recent years, and especially since the onset of the financial crisis, policymakers both in the United States and abroad have begun to strengthen regulations governing derivatives trading, with a particular focus on the decentralized and opaque nature of current trading arrangements. For example, the Dodd-Frank Act will require U.S.-based market participants to publicly report details of their CDS trades. In this post, we discuss the possible impact of increased transparency in the CDS market, based on our recent analysis of new and detailed data on the trading activity of major dealers. (See also new video coverage of our findings.)

Keywords: Dodd Frank Act; Transparency; CDS market; Transactions;

JEL Classification: G1;