Isda proposes net physical settlement

The International Swaps and Derivatives Association has released a draft of the net physical settlement supplement to the 2003 credit derivatives definitions, which aims to simplify the settlement of credit default swaps (CDSs) after a credit event.

The supplement proposes that in the case of a credit event, open positions should be netted out and the balance cash settled. Once the supplement is published, it is hoped it will be adopted by the broader market and that legacy trades may also be