Two Ways To Play: Fed To Create a CDS Exchange-Minyanville

Two Ways To Play: Fed To Create a CDS Exchange

Terry Woo Oct 06, 2008 5:22 pm

Two Ways To Play: Fed To Create a CDS Exchange


		Strengthen your portfolio in good times and bad.

Reuters reports the New York Federal Reserve is planning to host a meeting with banks and institutional investors Tuesday in hopes of developing a central counterparty for the $55 trillion global credit default swaps market.

The Fed said in a statement that industry participants and regulators agreed that a “robust central clearing infrastructure” is needed for these OTC derivatives. “This will help reduce systemic risk associated with counterparty credit exposure and improve how the failure of a major participant would be addressed.”

The Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE) are the companies in talks with the Fed in creating the CDS exchange, according to Reuters, although neither company has confirmed the report.

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From the Bull Pen: Is a bank bottom near? Maybe. Maybe not. But those bulls looking for financial exposure can consider SVB Financial Group (SIVB). Note the impressive relative performance today, as well as for the past year. Bulls might be able to catch the stock on a pullback towards $55.

From the Bear Cave: Sticking with the exchange theme, bears can consider NYSE Euronext (NYSE). The stock could see a sharp rally in coming days, but should it fail at $40 resistance, we could see it retesting its low. Remember, this stock is still subject to short selling restrictions effective through 11:59 p.m. on October 8th.

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