# CDS notional falls again, says Isda

Outstanding notional volume in the credit default swap (CDS) market fell 19% in the first half of this year, primarily as a result of trade compression and portfolio reconciliation.

According to the International Swaps and Derivatives Association's mid-year 2009 market survey, the notional outstanding across asset classes was $454.1 trillion at the end of June, a slight increase from$450.4 trillion at the end of 2008. The first six months of the year saw the notional outstanding of CDSs decrease from $38.6 trillion to$31.2 trillion, the third drop in a row. The size of the credit derivatives market also fell in the first and second halves of 2008.

There has been some pick-up in the interest rate derivatives market as a result of interest rate cuts, Isda said: the market grew to $414.1 trillion from$403.1 trillion at the end of 2008, although this still represents an 11% decrease from the mid-year 2008 figure of $464.7 trillion. The outstanding value of equity derivatives remained almost unchanged, at$8.8 trillion dollars from $8.7 trillion at the end of 2008. Gross credit exposure before netting is estimated to be$26 trillion. After netting but before collateral, credit exposure is estimated to be $3.8 trillion. In July, Swedish technology company TriOptima said portfolio compression through its triReduce service had eliminated$9 trillion from the CDS market's notional outstanding in the first half of 2009. This followed tear-ups of \$30.2 trillion in notional in 2008 as a result of triReduce compression cycles.

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