"The hardwiring process is a crucial part of the ongoing process undertaken to strengthen the infrastructure of the CDS market. Isda and its members are keen to complete the work as soon as possible," said Robert Pickel, chief executive of Isda. "However, given the importance of this matter, it is essential that we take the time to ensure the process functions efficiently from day one."
"Hardwiring" refers to the fact the auction process will become an integral part of CDS documentation, rather than a separate set of procedures.
This is one of the goals the Operations Management Group - an industry body comprising 15 major dealers and three industry associations, including Isda - set in a letter to the Federal Reserve Bank of New York on June 9 with the aim of improving operational risk management for over-the-counter derivatives. The March deadline is somewhat later than the initial target of the end of 2008. Isda said the original timetable was affected by the major market disruptions of September and October 2008, including the credit events relating to Fannie Mae, Freddie Mac, Lehman Brothers, Washington Mutual and the three Icelandic banks, and the resulting accelerated timetable mandated for central counterparty clearing.
Since the start of September, Isda has hosted 15 CDS settlement auctions, all of which the organisation says have run smoothly.