Rumor Of Sovereign CDS Ban Picking Up Steam, Lifting Market

Tyler Durden's picture

As reported earlier, some more CDS trader talk:

I m hearing and being asked from a few sources that the CDS markets in the sovereign (Greece, Dubai. Etc) nations are going to “banned “ from trading to avoid a BSC or LEH like collapse. I personally have no idea if there is any truth to the story  but it seems to be just going around in the last half hour. Obviously Greece is on the forefront of traders minds and I don’t know if a “ban” in trading this stuff is a good or bad for the markets  (trades seem to think would be a huge positive)…. But I would appreciate any insight.

Of course, the fact that the mechanics of this "ban" are so inconceivable as to make the rumor beyond ridiculous, is precisely why everyone is terrified it will be true. After all this is precisely the kind of galactic stupidity/insanity we have grown to expect out of the 3 neurons shared between Bernanke/Bair/Shapiro/Geithner.

As for whether aside from machines is buying this (for now), just look at today's comparative volume.

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Cursive's picture

Ban trading?  Wait, I was told by TPTB that "The Market" knows everything.  Who could "The Market" be wrong here and, if not, why would we shut it down?  The only thing that needs to be shutdown is Global Liars Inc. and the Extend and Pretend division.

Divided States of America's picture

THey should ban all trading period. Then we can have all our assets marked as of prices right now so nothing ever declines in value.

btw, would love to b1tchslap Trish on CNBC, she keeps repeating THE MARKETS ARE OFF THEIR LOWS the whole friggin day.

Missing_Link's picture

I think they tried that in Zimbabwe.  And Venezuela.

Anonymous's picture

...Wha?...bitchslapin' Trish?-

Anonymous's picture

i bet what you really mean is you would like to have Trish b1tchslap you because you like that kind of thing. What do you think? Is that what you're really trying to say?

Missing_Link's picture

Meh.  I'm hanging on to my EUO (ProShares UltraShort Euro).  Pretty sure that can't be banned.

Anonymous's picture


Prof Gulliver's picture

Whatever, the market loves it. Nasdaq now green, Dow roars back. There will always be something that can move this market higher. Until it can't. But you've got to tip your hat: the "can't" seems to be forestalled forever. Until it's not.

David449420's picture

I don't think that your "something" that moved the market higher was news, good or bad. What is moving the market higher is your government. immorally, dishonestly and probably criminally.

Madcow's picture

Money moving into stocks because of a fear of inflation is not good news for anyone but those who understand and control the future of the credit spigots

Edwinmba's picture

slight rumor- measure of risk vs measure of value; cds v stocks dont see how they can do it


No More Bubbles's picture

Just mark it all ZERO!

Oso's picture


Hephasteus's picture

Ya but it's got a chewy neuget of rediculousness. How can you NOT EAT IT UP.

Stuart's picture

Rumour:  Next, stamp trading will be banned. 

Internet Tough Guy's picture

Only if the price of stamps start to fall.

BS Inc.'s picture

What they really need now is a real live version of that kid from the "Twilight Zone" episode where the kid forced everyone to think happy thoughts non-stop.

buzzsaw99's picture

The fed backstops all the big time gamblers, no risk, drive on!

Assetman's picture

That seems to be the central message, buzzsaw.

There has been more than ample opportunity to for policy makers to apporach derivatives reform in a systemic way.

But no, we can have that.  It's still okay to do these transactions in the shadows with little underlying collateral.

So now we are now saying that trading in CDS is okay, so long was the numbers go in the "right" direction-- and if not, we'll "shutter down". 

In comparison to a rational, systemic solution-- this is just plain stupid, no matter how much lipstick you put on it.

Then again, why should be expect more out of our policy makers?

Ivanovich's picture

Duplicate - thanks loading page.

Ivanovich's picture

Out of curiousity, are the 3 neurons shared also shared by's servers?  Because the server goes down more than a White House intern.

shargash's picture

This feels a lot like last year in the period between Bear & Lehman. All we need are Gasparino feeding us planted bailout rumors and Cramer assuring us "Greece is no Iceland."

BS Inc.'s picture

Agreed. The fact that they need to float so many rumors and policy proposals shows they are fishing for whatever will keep the markets stable (even more than usual). They're like cornered rats at this point.

HelluvaEngineer's picture

wtf...yeah, so are we just being set up for lock limit down on Tues. or what?

Hondo's picture

First, that's not going to help Greece except maybe for the timing of the bankruptcy.  Second,  why not ban them for's all insane.

AnonymousMonetarist's picture

Oh my who is the flippin' genius that is coming up with this one?

Let's see if folks can't hedge with CDS what might they do ... hmmmm ...  dump the underlying?

And if speculators can't use CDS, what might they do...hmmmm...short the underlying?

$%@#$%&* Nancy Capitalists...

Assetman's picture

And if speculators can't use CDS, what might they do...hmmmm...short the underlying?

Probably not... policy makers will ban short selling as well.

That's called "foresight".

BS Inc.'s picture

I'm about 90% resigned to the fact that any money I make selling short will be taken from me as a "windfall tax" when the market finally goes down.

So, they won't necessarily ban it, just make it so unprofitable relative to the risk that no one will do it.

I hate these people.

MarketTruth's picture

Are you there yet?


Are you ready to finally pull out all your funds from banks and Wall Street?


Sell off all stocks/trades?


Perhaps even go on a labor strike with your co-workers and picket your State government?


Or are you just sitting there like a good sheeple?


"And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale. " -- Thomas Jefferson wrote in May 1816

AnonymousMonetarist's picture

Damn dirty apes... it's a madhouse!

pooplagrande's picture

Wake up! This isn't our's theirs. We are just tiny little insignificant pieces of poop dust.

Anonymous's picture

you can still short the bonds. big deal...

Comrade de Chaos's picture

hm, would benefit my recent emerging market puts handsomely ... just imagine all of those crazed JPM/MER robots going for distance...going for speed.

The point is, while CDS were not as popular in the late 80's as today, it didn't stop the  "emergency" *emerging markets runs.

pooplagrande's picture

Oh don't Tuesday market open, Captain Moron and his monkeys will come up with some way to "save the day" (aka kick the can down the road for at least another whole entire month or so).

A_MacLaren's picture

Say it ain't so...  How in evil's name can the TBTF prop desks expect to make money if the under-priced sovereign CDS are not allowed to trade? 

Oh, wait a second...  Can you really trust the counter-party to make good the Sov-CDS contract?

Let's see...  Monetary Meltdown = System Lockup = TEOTWAWKI = Make the contracts payable/force settlement in Gold.  And good luck collecting...

Anonymous's picture

The great Monolith is designed to keep stocks in the green through any event including Nuclear attack. I can't wait for this fucking machine to crash.

Anonymous's picture

There's a method to this madness, folks. First identify the problem and the cause and effect. Then deliberately mistake the effect for the cause and take action as necessary. Then assure everyone that you've solved the problem. Market going down? Ban short selling. CDS spreads widening? Must be speculators. Consumption down? Must be people hoarding money.

Just think of it like this: why blame the rain for flooding when you can always blame the puddles? This is definately standard operating procedure. No one is allowed to be surprised.

Anonymous's picture

How cam anybody ban a private contract between two parties?. What they can do,is announce that no goverment would be a party to bailout of any private party with cds exposure(AIG anybody?). But then again,they should just do that with all private corporations. No bailout,period. On the other hand,I don't see how such measures(be it a ban on cds,or no bailout)would alleviate anybody's pain. So now without the insurance provided by the cds,investors simply add the extra risk to the yield so that it would be built in automatically.

calltoaccount's picture

Basic principles of insurance law which require an insurable interest (ownership or risk of commensurate loss) in that which you insure (especially regarding someone else’s life or property), were legislatively trashed to enable rapacious, ethically bereft speculator banks and hedge funds to erect a new and extremely lucrative swindle using a kind of debt insurance product they called credit default swaps (CDS); so named, because by their rightful name, bond insurance, they would violate every state’s insurance laws and be void as against public policy without ownership of the underlying bonds—which was certainly not in the predators game plan.  Parlaying never having to actually buy or own the underlying bonds along with the ability to broadly manipulate and malign their market price downward, made 40-1 leveraged CDS bets almost sure winners; outcomes dictated from the sidelines by greedy gamblers with little or no risk of commensurate loss. 

They should simply declare all CDS bets unenforceable as against public policy, unless and only to the extent the holder also holds the underlying debt.

Cognitive Dissonance's picture

"After all this is precisely the kind of galactic stupidity/insanity we have grown to expect out of the 3 neurons shared between Bernanke/Bair/Shapiro/Geithner."

Now that's some funny shit.

Of course, with only 3 neurons shared by 4 morons, someone must always be in "idle"....err..."Idol" mode at all times.

The Patagonian's picture

The weird thing no one is talking about is use value.  I've said before that the only thing useful about a dollar bill or 5 euro note is that I can roll it up and snort cocaine with it or start a fire to warm myself.  That is outside what society places a value on these pieces of paper.  Less than five euros and I am dealing with coins, which may be useful to scratch lotto numbers off a ticket with.

Nevertheless, CDS and CDO are merely agreements on a certain value or worth.  If these agreements go tits up, everyone is talking about a Mad Max scenario.  But if that happens, it is only human beings to blame, because these agreements are only human constructs.

Since we humans constructed them, we can also say they have no worth and therefore cannot harm us.

That may be wishing for unicorns, I agree.  But in physical reality these things that we have made up offer no real existential threat to the human race - only to a human system of agreement that we are desperately clinging to.  I put forth that once we let go of such system, we no longer face existential threat.

Of course that demands that we step out of comfortable bubbles and I do not think the human race is ready for that yet.

So we will see what comes.  But what ever comes, it will be from our own making.

And don't think investing in guns and reloading will save you.  What will happen when trade and petroleum shipments break down?  You won't get your Breakfree, that's for sure.  After a thousand rounds shot out of your weapon of choice, you will soon find that it jams up without lubricant and is worthless.

Not one of the gold bugs advocates going to the archery range, but maybe they should.  At least trees for arrows are more available than lead and the lubricant needed for firearms.

Traianus Augustus's picture

New rumors Ben Benanke at your earliest convenience.  At least 365 new and creative rumors to be used at Ben's direction.  Foreign and Domestic rumors will be considered.  Thank you for your patronage!!!!

Anonymous's picture

Neat.... wonder how they'll stop sovereign cds on a dime & net out who's exposed to what and settle it all nice & clean without bankrupting banks & insurance cos. trafficking this junk. Even if they did ban trading sovereign cds, riskier bond yields would skyrocket, including those of the U.S., so... This ban will not come to pass. ever.

Anonymous's picture

if the source does not know whether it is good or bad to ban trading in evaporating securities he is another part of the financial problem - he is not part of the solution.....

it is NEVER a good idea to ban or suspend trading securities no matter how irrationally the market is will eventually come to its senses....even if many billions are made and lost by the saavy and the fucktard....

the need to ban trading is based upon the need to be stupid.....

Anonymous's picture

So, if I close my eyes they go away??

Does that work with car payments?

What a bunch of fucks.

BlackBeard's picture

HAH! if they DO find a way to enforce a ban, we'll see Sovereigns sell off in a huge way.  Do any of you honestly think that the majority of those contracts are being held by naked specs?  Me thinks that the majority of those contracts are being held by people that are long.  IF they can't hedge their long sovereign positions....then why hold?  It would be time to sell.

Anonymous's picture

Ban it ?

How about banning bad govt....and replacing it with something real....

Anonymous's picture

Some landlslide on the move

Update on Gensler's intentions

"Unfortunately, a measured response does no good to the dealers in CDS, who require volatility and even panic to make their game a profitable one. If contagion spreads in uncontrollable ways, so much the better for the traders in volatility, never mind the collateral damage.Until the CDS market is confined to buyers who have an underrlying interest in the risk being covered, and sellers who are regulated as insurance companies with adequate reserves, this market will remain a reckless enterprise bent on arson. Serious issues of sovereignty and stability are at stake. Regulators have to stop ignoring the piñata party and start providing adult supervision." James Rickards op-ed
in today's FT 'How markets attacked the great pinata'