Milestone Dodd-Frank compliant CDS trade completed

Dow Jones Newswires

11 Feb 2011

The first credit-default swap trade that is believed to be compliant with new swap trading rules being proposed by US regulators as a result of the Dodd-Frank financial overhaul law was completed yesterday.

Behind the trade were BlueMountain Capital Management, a US hedge fund, and Deutsche Bank, acting as the dealer and processing agent.

Credit default swaps, or CDS, are over-the-counter derivatives that allow investors to hedge or speculate against losses on corporate or government debt.

The CDS in question was executed on an electronic platform for institutional customers run by Tradeweb, which is considered a leading candidate for swap execution facility, or SEF, status under the new rules.

SEFs are a type of trading venue born out of the Dodd-Frank law. To be eligible as a SEF, platforms have to allow multiple customers to access prices from multiple dealers at the same time, should they wish.

“The financial markets are now preparing for the new regulatory environment under Dodd-Frank,” said Scott Beardsley, principal and head of operations at BlueMountain Capital, in a statement. “Today’s trade represents the first-ever transaction to fit within what many market participants expect to be the new model for central clearing and electronic execution of derivatives.”

Under the new law, a large part of the swaps market will have to be traded electronically and centrally cleared by processors that guarantee the swap in case either counterparty fails. Regulators want to see as many swaps as possible go through these clearinghouses because they believe it will reduce counterparty risk in the financial system and prevent another financial crisis.

“After implementation of Dodd-Frank, clearing and trading on regulated electronic platforms will be required and the market is now accelerating its preparation for the new environment,” said Lee Olesky, chief executive of Tradeweb.

The electronically executed and cleared CDS trade from BlueMountain was cleared by CME Clearing, part of CME Group, and ICE Trust, the clearing arm ofIntercontinentalExchange.

13 Responses

  1. AND here is the actual complaint for David Becker, the counsel at the SEC





  3. Ian,

    Think I read the same article — if so, it stated the down payment is determined by FICO score. That is – the lower the score – the higher the down payment (biggest down payment 20% — and smallest down payment – 3% -for the those with good credit score. The range is 3% to 20% – and 20% is for very low FICO score.

    Hmmm– haven’t foreclosures been blamed on people who bought too much house- and with little down payment??? Of course, we know subprime mortgages were largely refinances. But, since they want to blame it on buying “Too much house” as the cause – isn’t 3% down — “buying too much house?” And, low FICO score borrowers are qualifying for home purchases??

    Would love to know if anyone who purchased a foreclosed home — is now in foreclosure.

  4. Making millions off of our hungry, Jamie Dimon sends the profits from food stamps to India. But don’t bash him, he’s pretty sensitive guy.


  5. Wake up they’re attempting to throw us a bone,so we will run in that direction and not pay attention to what they are really doing.Really one company out of how many,this is a ploy.If they were really serious they would do far more……….wait for it :they are not.I believe that this is what shrinks call attention getting behavior and they are attempting that with one company.Pay attention theres way more to the story.

  6. I love the fact that we now (at least for a little while) have someone actually abiding by the law and ordinary morality in a financial institution or financial transaction. Doesn’t everybody know out there that hedge funds operate outside the law, because there is no law to control them. Hedge funds hold an enormous amount of wealth which is stolen at least in part from the working and middle classes. SOS Burmese8@yahoo.com

  7. From yesterday’s WSJ- banks are now, on average, requiring 20% down on home purchases. I didn’t read the whole article, but I believe it was stated that this is nationwide. This is setting things up for some other reason. My guess: Anyone buying a home from a builder or a private homeowner, will have to put down 20%. But if you deal with the banks on foreclosed properties, they will “work closely with the purchaser” and accept a lower down payment say 10% or even 5%. This will get rid of all the illegally foreclosed properties, while allowing the mark-to-fantasy valuation of assets on the banks’ balance sheets, thereby allowing the fraud to continue for an even longer period of time.

  8. Anything that DEUTSCHE BANK does in OUR country it will NEVER be in the right direction, they are without a doubt the biggest thieves that ever sat foot on our country. At this point anything going in any direction other than the direction of helping the American people it’s NOT in the right direction, what am i supposed to do? get on my feet and start cheering that they “completed” their first actual “LEGAL” transaction? PLEASE!!! as if they are not expected to do legal “things”? get the F*****k out of here DIRT BAG BANK!!!!!

  9. yah, well as it turns out Andrew Feldstein started Blue Mountain Capital and he played basketball with B. Obama in law school. Blue Mountain was started to take advantage of the CDO market back in 2005 or so. Book by G. Tett, Fools Gold,

  10. obama , you can wait until Deutsche Bank and
    CHASE are one . Deutsche Bank and CHASE has
    already the same mailbox in Foreclosure Homes.
    O, I miss CORELOGIC , who make the price for CHASE on CHASE WEB.

  11. Deutche bank? Really? the biggest foreign gansters?

  12. Any step in the “right direction” usually means the banks comes up with a way to weasel out of regulation or jail. We shall see which direction this step will be. Debi

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