Dealers are hoping to have a preliminary draft of amended CDX and iTraxx default settlement documentation ready for the Federal Reserve Bank of New York by year-end or early January. The final changes, due to the Fed by the March roll, are expected to formalize procedures for cash settlement of credit events on index-referenced contracts.
The changes are intended to make life easier for people, said a lawyer representing some of the 14 dealers involved in the discussions. "This way there won't need to be a new protocol every time there's an event." Defaults earlier this year by Collins & Aikman Products Co., Delta Airlines, Northwest Airlines and Delphi Corp., each triggered separate International Swaps and Derivatives Association CDS Index protocols, calling for physical settlement of single-name credit-default swaps and cash settlement of index-traded CDS (DW, 11/4). Dealers, lawyers and ISDA officials said it is premature to comment on the detail of the draft.
