Banks move to boost credit derivatives liquidity

JP Morgan Chase and Morgan Stanley have agreed to standardise most of the items on their European credit swap master agreements, in a move designed to increase liquidity in the credit derivatives market.

By cutting the widely used International Swaps and Derivatives Association (Isda) documentation down from several pages to just one, the banks aim to minimise the time taken to execute and confirm a trade while reducing documentation risk. “Frequent credit swap traders will be able to increase the volume of confirmed trades, thereby increasing market liquidity and growth of the credit derivatives business,” said the banks in a joint statement.

Standard Isda master agreements for credit swaps

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