New clearing rules may make CDS prohibitively expensive, traders warn

President Obama signing the Dodd-Frank Act in July. The new regulation contains provisions on central clearing of derivatives

Sweeping regulation on credit derivatives, first proposed in the wake of the financial crisis, is set to be implemented in the coming months. Market participants say the new rules will have a significant impact on CDS trading, and may even force some dealers out of the market.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, announced by the Obama administration in May 2009, was signed into law in July this year. It includes measures requiring the central clearing of CDS – intended