IOSCO Report on Post-Trade Transparency in Credit Default Swaps Market

On August 10, 2015, the International Organization of Securities Commissions (IOSCO) published its final report on “post-trade transparency” in the credit default swaps (CDS) market (FR17/2015).

The term post-trade transparency refers to a regulatory system that mandates disclosure of information, widely accessible to the public, about the price and volume of each relevant transaction. The term does not refer to regulatory structures that allow for voluntary or selective disclosure of data.

The report analyses the potential impact of mandatory post-trade transparency in the CDS market. The analysis is based on a review of relevant works of international bodies and academic literature, an examination of publicly available transaction-level post-trade data about CDS, a survey of market participants and other market observers regarding their use of certain publicly available post-trade data and its perceived impact on the market.

IOSCO concludes that the data does not suggest that the introduction of mandatory post-trade transparency had a substantial effect on market risk exposure or market activity in the CDS market. In addition, IOSCO has identified certain potential benefits and costs to mandatory post-trade transparency, as set out in part VI of the report.

In the light of the potential costs and benefits, IOSCO believes that greater post-trade transparency in the CDS market, including making the price and volume of individual transactions publicly available, would be valuable to market participants and other market observers. Member jurisdictions are encouraged to take steps towards enhancing post-trade transparency in the CDS market in its jurisdiction. To assist, part VII of the report includes recommendations that IOSCO jurisdictions may wish to consider.

In an accompanying press release IOSCO notes that additional data from jurisdictions with mandatory post-trade transparency will enable further studies of the impact of post-trade transparency in the CDS market and other OTC derivatives markets.