A spike in credit default swap volumes in July has exposed weaknesses in dealers’ ability to process trades in a timely fashion. Once again regulators, led by the Federal Reserve Bank of New York, are expressing concern over what looks like a resurgence of the backlog mess that first caught their attention in 2005.
Recent CDS market metrics published by the New York Fed show a massive burst of volumes in July, followed by an uptick in unconfirmed trades (see graph).
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