As reported on Risk News on September 12, the protocol will be open until October 2, to be followed by an auction on October 6 which will determine the final settlement prices. Market data provider Markit and Creditex, a credit derivatives execution specialist, will run the auction. Estimates of the total volume of outstanding CDS run between $250 billion and $500 billion. The deadline for cash settlement is October 15. Thanks to the US government guarantee, recovery rates are expected to be extremely high - in the mid-nineties - meaning that CDS protection sellers are unlikely to make significant losses.
Isda is also planning to open its Lehman Brothers protocol on October 6, to run to October 8 with an auction on October 10. The protocol for the failed mortgage lender Washington Mutual is tentatively planned for October 14-17 with an auction on October 23, Isda said today.