On September 5, ISDA submitted a paper to the European Securities and Markets Authority (ESMA) and the European Commission in support of its earlier response to ESMA’s Markets in Financial Instruments Regulation (MIFIR) review consultation package 4 (CP4) on transparency for derivatives. The paper argues that the proposed assessment of five-year single-name credit default swaps (CDS) that reference global systemically important banks (G-SIBs) as liquid, proposed in CP4 for the purposes of public transparency, is fundamentally flawed. It highlights that the methodology used to assess the liquidity of five-year single-name CDS referencing G-SIBs is markedly different from the methodology used to assess other derivatives and bonds and presents analysis that shows these instruments would be deemed illiquid if they had been assessed in a way that was consistent with other instruments. This is important, as it dictates whether trades in these instruments should be made public in real time or deferred. ISDA has consistently advocated that making trades in illiquid instruments transparent in real time places undue risk on liquidity providers.
Documents (1) for ISDA Paper on Proposed Liquidity Assessment for Single-name CDS
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