ISDA’s CDS Big Bang Protocol Goes into Effect for US Market

Following months of preparation by the banking and vendor communities, the US market has today seen the go live date for the overhaul of the International Swaps and Derivatives Association (ISDA) credit default swap (CDS) standard protocols. The changes are aimed at reducing systemic risk by introducing a standardised pricing system for CDSs and making clear what procedures must be adopted should a default occur for a CDS contract.

According to Robert Pickel, head of ISDA, the big bang protocol will provide a framework for the industry by which it can standardise the traditionally opaque credit derivatives. It is hoped that the changes will also assist in the move towards central clearing for CDSs with the advent of central counterparties (CCPs) such as IntercontinentalExchange’s ICE Trust.