The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Credit derivatives: Trading backlog back again

What was hailed as a great success for the credit derivatives market, the tackling of the unconfirmed transaction backlog, has turned out to be far from a mission accomplished.

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). Despite all the resources thrown at this problem by the banks that signed up to the so-called Corrigan letter in 2005 describing how they intended to resolve the unconfirmed trades, data show the backlog has been creeping up slowly since December 2006.

Credit derivatives

Outstanding confirmations

Source: MarkIt


Unconfirmed trades had come down from near the 12,000 mark in 2005 to about 2,000 in 2006. Banks were able to get these numbers down by automating their CDS trading systems, manually clearing up trades in a series of industry lock-ins and increasing the back-office operations staff charged with sorting out mismatched trades.


You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree