DTCC Provides Further Market Transparency on OTC Credit Derivatives

The Depository Trust & Clearing Corporation (DTCC) today has brought further transparency to the global credit default swaps (CDS) market, worth more than $31 trillion, by expanding its public release of CDS data maintained in its Trade Information Warehouse to include historical information on those contracts.

The Warehouse is the only comprehensive global repository for the OTC credit derivatives market. DTCC gathers and stores in this global repository information on OTC credit derivatives and performs critical post-trade processing functions such as automated calculation, netting and central settlement of payment obligations, as well as settlement of credit events such as bankruptcies. The expanded data release will now show information on the legally binding records from the previous week, month and year, in addition to the data for the current week.

DTCC first began publishing the CDS information from its global registry on Nov. 2, 2008. Initially, DTCC will use the first week of data posted in November 2008 for the “year ago” data until actual “year ago” information becomes available in November 2009. This expansion will allow market participants, regulators and the public to gain greater perspectives on trends and changes in the values of these instruments.

“Because nearly all credit derivatives transactions are registered and maintained in the Warehouse’s global repository, the industry and regulators worldwide are able to assess from a central vantage point the value and risk exposures of the market, which is essential in times of crisis,” Stewart Macbeth, DTCC managing director and head of the Trade Information Warehouse, said in a release. “Transparency has also been enhanced in the marketplace, as the repository is able to provide the investing public and regulators with a view of the data registered in the Warehouse, which we release publicly on a weekly basis.”

The Warehouse proved critical a year ago this month, when Lehman Brothers declared bankruptcy. When rumors sent shockwaves through the market predicting that potential net liabilities on credit default swaps on outstanding Lehman CDS obligations could top $400 billion, DTCC was able to step in and dispel this misinformation by publicly releasing data from the Warehouse showing that the actual amount would be less than $6 billion. This had an immediate calming effect on the market.