Financial Times FT.com

CDS market set to begin switch into clearing format

By Aline van Duyn and Michael Mackenzie in New York

Published: March 26 2009 19:54 | Last updated: March 26 2009 19:54

The complicated and potentially costly process of switching the largest part of the $28,000bn credit derivatives market into a format that can be cleared is expected to start next month.

To reduce the risks to the financial system of a failure of one of the large derivatives dealers is an important priority for regulators. By forming a central clearing counterparty for credit default swaps (CDS), the most common credit derivative, such “counterparty risks” can be reduced.

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