- Close-out netting has reduced over-the-counter derivatives credit exposure by over 85%. Without the benefits of netting, banks worldwide might face a capital shortfall of over $500 billion.
- Close-out netting is necessary because it enables derivatives participants to protect against adverse market changes following default of a counterparty.
- Policy-makers have consistently supported the enforceability of close-out netting because it promotes financial system stability.
- Current proposals designed to promote orderly resolution of failed financial institutions should be crafted carefully to avoid weakening the benefits of close-out netting.
Documents (1) for The Importance of Close-Out Netting
Latest
Strengthening DC Governance
The Credit Derivatives Determinations Committees (DCs) play a vital role. Without a single, industry-wide determination on whether a credit event has occurred, it simply wouldn’t be possible to clear credit default swaps (CDS), making the market less safe and less...
ISDA CSA Significant Errors Notification SOP
The ISDA CSA Notification of Significant Error or Omissions Suggested Operational Practices (SOP) considers current institutional processes and outlines suggested operational practices related to the new requirement under §26.3(2) of the Canadian Trade Repositories and Derivatives Data Reporting rules rewrite...
ISDA Paper on UPI Identifiers
On July 16, ISDA submitted a paper (UPI as the Foundation for OTC Derivatives Reporting: The Case for UPI) to the UK Financial Conduct Authority (FCA). The paper was developed to complement ISDA’s response to the FCA’s discussion paper DP24/2:...
IRD Trading Activity First Quarter of 2025
This report analyzes interest rate derivatives (IRD) trading activity reported in Europe. The analysis is based on transactions publicly reported by 30 European approved publication arrangements (APAs) and trading venues (TVs). Key highlights for the first quarter of 2025 include:...