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Credit Derivatives Market Shrinks 12% as Dealers Reduce Trades

Bloomberg – Credit-default swap dealers reduced the volume of outstanding contracts for the first time amid efforts to reduce risks in a market used to hedge against bond losses and speculate on corporate creditworthiness.

The volume of outstanding trades fell to $54.6 trillion from $62 trillion in the first half, the International Swaps and Derivatives Association said in a statement yesterday. It was the first decline since ISDA started surveying traders in 2001.

“This decrease primarily reflects the industry’s efforts to reduce risk by tearing up economically offsetting transactions and demonstrates the industry’s ongoing commitment to reduce risk and enhance operational efficiency,” ISDA Chief Executive Officer Robert Pickel said in the statement. “We expect to see more effects of this over time.”

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