The Federal Reserve Bank of New York has given the 17 banks that are responsible for more than 90% of CDS trading until July 31 to present reform plans, chiefly for creating such a facility, with the objective of reducing operational and counterparty risks. In June, the New York Fed’s chief executive, Timothy Geithner, announced that what is known as the Fed 17 was meeting to "outline a comprehensive set of changes to the derivatives infrastructure". These include the establishment of the central counterparty and the setting of concrete targets for achieving substantially greater automation of trading and settlement. "These changes to the infrastructure will help improve the system’s ability to manage the consequences of failure by a major institution," said Geithner in a statement.
But it is the central counterparty that is at the top of the New York Fed’s priority list. It has been...
