Lehman's CDS counterparties learn the extent of losses in London today
LONDON – The FTSE 100 was down 8% by mid-morning as London attempts to settle hundreds of billions of pounds worth of credit default swaps (CDS) in the wake of the collapse of US investment bank Lehman Brothers on September 15.
The settlement coincides with the relaxation of the Securities and Exchange Commission (SEC)’s ban on short selling, which saw US bank Morgan Stanley drop 26% on the New York Stock Exchange by the close of yesterday.
The scale of losses to Lehman counterparties and where those losses will fall has been the subject of increased speculation over the past fortnight. Uncertainty is increasingly translating into speculation in the markets themselves, as it is reported that Lehman’s collapse will represent the biggest ever payout in the $55 trillion CDS market.
More on Regulation
Huge losses will affect risk modelling and capital calculation
Complex investigations and delays in trials over index rigging
But cash variation margin restriction may upset the buy side
Rules on individual accountability will have big impact, say lawyers
Sign up for Risk.net email alerts
Watch highlights of this year's London conference
Operational risk and the challenges of defining and dealing with conduct risk
Watch discussions and speakers from our North America conference
In the February 2014 editorial video, OpRisk's latest industry survey finds room for improvement in risk management
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.