Derivs - Regulation

A decision made earlier this month by a Delaware bankruptcy judge involving two energy companies has called into question whether setoff clauses in derivative contracts can be upheld.

Buysiders and sellsiders are being invited to a Jan. 29 forum at the Times Center in New York aimed at educating investors about pending changes to credit default swap contracts.

The decision of whether changes Liz Claiborne made to its credit facility will trigger credit default swaps on the company’s bonds may be finalized by the dealer community Tuesday, according to one market watcher made aware of the plans.

New Indonesian regulations aimed at curbing rupiah speculation will intentionally snag close-out netting under the International Swaps and Derivatives Association Master Agreement.

Other market participants appear to be interested in getting a slice of the credit default swap clearing pie—beyond the existing four.

The International Swaps and Derivatives Association is in the final stages of drawing up a protocol that will see all signatories adopt the close-out approach for early contract termination with a defaulted counterparty as envisaged in the 2002 Master Agreement.

The Hong Kong Monetary Authority issued a report Thursday that includes the recommendation that “health warnings” be attached to retail products containing derivatives.

The first synthetic collateralized debt obligation where Lehman Brothers is a credit default swap counterparty has gone into receivership, pushed in by investors demanding they be paid back immediately.

Credit default swaps on LyondellBasell Industries bonds were triggered last night, after the petrochemicals company filed for bankruptcy protection of its U.S. operations and one of its European holding companies, citing a slump in demand for its products.

The settlement auction results for bonds and loans referencing bankrupt publisher Tribune Co. landed wide apart this afternoon. The CDS recovery value on the bonds came out at 1.5%, after an interim result of 3.5%, whereas the recovery for LCDS landed at 23.75%.

Details have emerged about how NYSE Euronext subsidiary Liffe and LCH.Clearnet are setting margins for credit default swaps cleared through their newly launched clearing platform—the first such platform to go live.

Close-out netting regulation could be in place in Mauritius sometime early next year.