GLOBAL - Press reports that Eurex is set to list the first futures contract on credit default swaps (CDS) were welcomed by trustees and technology experts.
CDS are increasingly used as part of pension fund portfolios, though they have been viewed by many as risky. This is because they are traded over the counter and the market has been criticized by some regulators for not having sufficient technology to adequately log and register trades.
Con Keating, pension fund trustee and principal of The Finance Development Center, said the proposed moves would improve breadth and depth in the market. “It would bring the market closer to standardization, which would make their use more attractive for pension funds.”
Mike Turner, associate partner at m.a.partners, a capital markets consultancy, said he believed over the counter derivatives investment managers faced issues and barriers to entry in a number key areas including technology, operations process and expertise, counterparty risk management and operational risk
He said: “An exchange traded credit derivative contract would address issues in all these areas and would allow fund managers to participate in a limited way in the credit derivatives market.”
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