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CDS Execution and Clearing Mechanisms

In: Credit Default Swaps

Author

Listed:
  • Christopher L. Culp

    (Johns Hopkins University)

  • Andria van der Merwe

    (Johns Hopkins University)

  • Bettina J. Stärkle

    (Compass Lexecon)

Abstract

A credit default swap (“CDS”) can be executed bilaterally by two counterparties, through a broker, or (in the USA) on a Swap Execution Facility (“SEF”) or an exchange. After the trade, the CDS may remain uncleared or can be novated to a central counterparty (“CCP”) for clearing. In a cleared CDS, the CCP is the counterparty to both CDS buyer and seller, guarantees the performance of the obligations under the trade to both trading counterparties, and administers a system of netting, marking-to-market, twice-daily cash resettlement, and margin. We review here the evolution of CDS execution and clearing (as well as the relevant regulations) and summarize CDS execution and clearing market activity in recent years.

Suggested Citation

  • Christopher L. Culp & Andria van der Merwe & Bettina J. Stärkle, 2018. "CDS Execution and Clearing Mechanisms," Palgrave Studies in Risk and Insurance, in: Credit Default Swaps, chapter 0, pages 125-138, Palgrave Macmillan.
  • Handle: RePEc:pal:psircp:978-3-319-93076-3_6
    DOI: 10.1007/978-3-319-93076-3_6
    as

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