The International Swaps and Derivatives Association published a loan-only credit default swap confirm last Thursday, much to the delight of those playing in the space. "I think this is going to be very good for the market," one trader said. "I don't think we'll see an immediate blip, but it definitely helps marginal players that are thinking about getting involved."
Kimberly Summe, general counsel, said that for the document, the group focused on the settlement aspect and that there is a procedure for dispute resolution if needed. It had gone out with a pre-publication draft last Monday, a spokeswoman said.
The confirm goes hand in hand with the physical settlement rider the Loan Syndications and Trading Association has been working on. The LSTA published an exposure draft of the physical settlement rider to the LCDS confirm at the end of May and is accepting comments on the draft until June 16 (CIN, 5/29). Elliot Ganz, executive v.p. and general counsel, said the group has not received any comments and he thinks it is likely in its final form now.
The trader explained that the ISDA-approved document will help encourage those players interested in the product now that it has the ISDA stamp of approval. "It gives the product a lot of credibility," he said. He said it will also be a welcome relief to banks and customers, because the actual swap document traded will be brief and reference the ISDA document. They will no longer have to leaf through a 20-30 page swap document.
Separately, members of the dealer group have been working on a loan index, expected to be ready in August or September. Traders met in May (5/15) and the group has been emailing opinions back and forth about basic issues such as what the product will be called to the more complex discussion of how to deal with settlement.