19 Nov 2008, David Benyon, Operational Risk & Regulation
NEW YORK - The International Swaps and Derivatives Association (Isda) has announced it will publish auction terms for loan-only credit default swap (CDS) transactions referencing Canadian hardware firm Masonite, a constituent of the Markit LCDX index. The industry association's announcement follows its October release of auction protocols for Iceland's three nationalised banks and September attempts to reassure Lehman Brothers investors.
Isda says the auction terms will be published on its website. LCDX dealers voted to hold an auction, although the auction's terms and date have not yet been set. However, it will be conducted according to LCDX auction rules, which will also be published on Isda's website.
Auction terms will outline a settlement mechanism similar to those used to settle CDS contracts referencing Lehman or US bank Washington Mutual. Unlike those mechanisms, however, the auction mechanism for Masonite is already built into Isda's standard loan-only CDS documentation, requiring no new protocols. Markit and Creditex will administer the auction.
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