ISDA says Credit Event

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Praying Mantis
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Waaay south
Looks like the banksters are going to pay out on Greek CDS. This is going to get very interesting from here. Smart money would have Spain and Portugal buying CDS on their own debt, then defaulting. That would be a nice net zero and the bankers would finally get the fucking theyy have been giving these countries for so long.
Goldman seems to be the major underwriter of Greek CDS's according to the initial reaction of bank stocks:




I read a report on ZH that quotes a total of 3 billion to be paid out on these Greek CDS. Someone needs to 'splain to me exactly why everyone over there was all up in arms about a credit event being declared. Fucking Lehman Brothers nearly took out the entire financial system, yet Greece, who holds a trillion and a quarter in total debts just defaulted on a shit load of bonds, and the market just yawns? What the fuck is going on here? Are there a bunch of these things hidden under the bed somewhere?
KMS, I am beginning to think that it was never about the CDS in the first place, and that it was always about the banks who have this poison on their balance sheets marked to face value instead of true value or something.

The next question is this: Now that Greeks are being paid a hell of a lot less money, and now that tourism has crashed and burned, and now that they have borrowed another huge pile of moolah, when does the sovereign completely default? We all know this deal did nothing but kick the can one more time.
Truth. Matter of fact, they are father in debt now than when they started the bond swap offer. ZH just reported on that today.
I read a report on ZH that quotes a total of 3 billion to be paid out on these Greek CDS. Someone needs to 'splain to me exactly why everyone over there was all up in arms about a credit event being declared. ...

I'm no expert on this subject, but my best guess (pulled from my arse, so FWIW) is that CDS will only be paid for the bond holders who didn't agree to the PSI deal (ie. only ~15% of bond holders) and are subject to the CAC provision.
dont normally but that one kind of threw itself at me

it amuses me when the grammer police occasionally light up at ZH though

hopefully we can all see the difference between a bit of fun and put downs

now wheres that spelchekka ......
I read a report on ZH that quotes a total of 3 billion to be paid out on these Greek CDS. Someone needs to 'splain to me exactly why everyone over there was all up in arms about a credit event being declared. ...

I'm still searching for a definitive answer to this...

Today legendary trader and investor Jim Sinclair told King World News the “credit event” in Greece totals much more than the $3.5 billion which is being reported by the mainstream media. Sinclair also said if the CDS’s are in fact made to pay, this could require the rescuing of eight international banks, through Fed swaps that could total in the trillions of dollars. Here is what Sinclair had to say about what is happening : “The release made by the International Swaps & Derivatives Association (ISDA), for the average Mensa member or genius, is totally incomprehensible. The press is using the word default, but the ISDA is using the word ‘auction.’ Clearly, the amount of CDS’s outstanding is infinitely more than the $3.5 billion that is being quoted.”

“The BIS confirms, in the area of CDS’s the total outstanding is approximately $37 trillion. So I believe the reports being given about this just being a small and modest market event is false. As a market observer and having more than 50 years in the business, the real number is at least 50% or more of the existing $37 trillion that is related to Greece.

The $3.5 billion figure being quoted in the press could easily be the reporting to the US Comptroller of the Currency. For example, a foreign, non-consolidated subsidiary of a US bank, operating out of London, reports the size and kind of the over the counter derivatives to the BIS, not the Comptroller of the US.....

“KWN readers need to know that non-consolidated subsidiaries have in fact been the main issuers of over the counter derivatives.

These banks were grantors of the derivatives, some in Germany and some in Switzerland. But it is not believable that German and Swiss institutions did virtually all CDS transactions and only a tiny fraction was done by US banks. That’s absolute madness.

If in fact ISDA defines this event as a credit default and the CDS’s are brought into play, you are going to bring in significant Fed swaps which will go to the ECB. These funds will then be redirected to the subsidiaries and to the foreign banks.

Very simply, the number is not $3.5 billion. It’s some part of $37 trillion. The emergency swaps from the Fed could total in the trillions of dollars. This is based on my strong belief that the figure of $3.5 billion is not accurate.

The implications of this, if it comes to pass, are a second rescue of approximately eight international banks. Central planners would attempt to totally camouflage this and it would only be readable by tracking swaps from the Fed because the Fed is the lender of last resort.

This type of event would be the ‘meat’ by which Alf Fields would be proven right on his $4,500 projection for gold. But strictly for traders, this does not apply to investors, but for the intelligent traders, they will flatten out their positions.

If my father were still living, I could hear him telling me, ‘Go flat!’ My father Bert Seligman and his business partner Jesse Livermore would flatten out their positions because of the ambiguity that exists here. Again, this is for the traders, which is not to be confused with investors which hold positions in gold.

The bottom line is if these CDS’s are made to pay, we are looking at an inflationary hell. This is also key, whether or not this is a default, this is a revelation of the outrageous weakness in all fiat currencies.”

... Jim Sinclair is also the son of Bertram Seligman whose family started Goldman Sachs, Solomon Brothers, Lehman Brothers and other major investment banking firms.

"...I know how things end in the market even before they begin. I am the son of one of the world's greatest traders, Bertram J. Seligman, who like, Jesse Livermore, always knew what was over the horizon. I do not pretend to have all the talent of those market giants but just some of it. Goldman Sachs, Solomon Brothers, Lehman Brothers, and Bache were a few of the firms started by my family. All this appears in a book called 'Our Crowd.'" (Jim Sinclair, GATA)

Our Crowd: The Great Jewish Families of New York by Stephen Birmingham relates details of the powerful New York banking alliance in which the House of Seligman—the ancestors of Jim Sinclair and his father, Bertram Seligman—became partners with the House of Rothschild and the House of Morgan:
Thank's for the research Bug.

I think it will take a few days for the peripheral damage to become evident from this complex, opaque and intertwined market of derivatives. Sunday night will give us an opportunity to get our first impressions from Asia. I hope we don't get a massive rush for the exits in gold and silver paper and derivatives.
Indeed, ancona. One take I read somewhere in the various ZH articles said (words to the effect of) that OK, maybe the NET exposure is only the $3.2 bn, but that some players might be much more on the hook than that, while those taking the other side of those trades net the total number down to that $3.2 bn.

Still, this will cost SOMEONE at least $3.2 bn. I wonder who will be left holding the (empty) bag?

I find it curious as well that this "Credit Event" did not make much of a splash, oh wait, of course, me thinking that the State Run Media would talk about defaults and credit events, how silly of me...


And this credit event only covers PART of Greece's debt. And we still have other the PIIS countries waiting in the wings.

If the Eurofellas are VERY LUCKY, maybe they can ring-fence the problem to just Greece, Portugal and Ireland. It appears (and all of this is so murky to an outside observer like me) that if Spain and/or Italy goes, well that's the fat lady singing... Those two go, FRANCE goes, and you have only DAYS (max) to make your last preparations for the financial tsunami to arrive here.


I'll be manning the computer this evening as well seeing how Asia and paper gold react to all of this.
Haven't heard much news on the Greek CDS since mid March, but it looks like holders of CDS for Portugal, Spain, etc. don't want to play the same games:
When is a default a default and when does a default trigger payouts on credit default swaps?

CDS market watchers and participants have been raising those questions for more than a year. But the issue has garnered greater urgency in the wake of grievances from CDS buyers who felt they weren’t adequately covered going into the Greek debt restructuring.

Now International Swaps and Derivatives Association is set to provide answers.

A lawyer for ISDA says the financial-market trade group will decide on potential revisions to legal wording governing the $32 trillion CDS market “within weeks.”

David Geen, general counsel for ISDA in London, said in an interview that the association had been “actively reviewing” potential changes to its credit-derivatives definitions for some time and is “looking to make possible amendments in the near future.”

The comments come as the association is set to kick off its 27th annual general meeting on Monday night in Chicago.

ISDA and some analysts said the Greek CDS settlement auction was a success, but detractors complained of quirks in the process that fixed payouts on the insurance-like contracts. Some parties that bought protection were worried they might not be able to secure payouts if Greece structured its debt exchange in such a way as to avoid triggering CDS.

Now, with Portugal and other sovereigns still struggling, there are concerns from some industry participants that these issues and potential new ones could undermine market confidence in CDS anew and roil the underlying bonds the contracts are designed to protect.
A lawyer for ISDA says the financial-market trade group will decide on potential revisions to legal wording governing the $32 trillion CDS market “within weeks.”

a clear admission that they are changing the rules and that your insurance is no longer valid
but thank you for your premiums and please continue to insure with us, for your peace of mind .......
May 9 (Bloomberg) -- Credit-default swaps market leaders will meet this week in New York and London to discuss changes to the contracts in what may be the biggest revisions since 2009.

The International Swaps and Derivatives Association’s credit steering committee will meet May 11 to discuss changes, said Steven Kennedy, an ISDA spokesman. Possible amendments to standard contracts, which are governed by ISDA, include how debt-for-equity exchanges would be treated after a bankruptcy, specifying that credit swaps only cover losses from defaults that occur after their purchase, and clarifying how the date of a so-called credit event is determined, according to people familiar with the situation.

The committee is considering the changes after Greece’s debt restructuring posed the biggest test for the $26.5 trillion credit swaps market since banks including JPMorgan Chase & Co. created it more than a decade ago. ISDA, based in New York, last overhauled the derivatives three years ago in the so-called Big Bang and Small Bang protocols that created a new set of standards to increase transparency and confidence in the market.

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