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ISDA Says 50% Greek Bond Haircut "Appears" Voluntary

Tyler Durden's picture


Well, they are right: 50% and the gun next to your head does not go off, hence "voluntary" or push for fair treatment in bankruptcy, get exiled from the ponzi in perpetuity, and hope for a 0% recovery at best. Next steps: the upcoming 90% haircut, which make no mistake is coming once the 50% one is deemed insufficient, just like the 21% before it, will also be voluntary? Thank you ISDA for confirming whose interests you have truly at heart, and for forcing everyone to take a quick peek at the members on your "determinations committee."

From ISDA (highlights ours):

For Immediate Release

ISDA Statement on CDS Credit Event Process

NEW YORK, Monday, October 31, 2011 – The International Swaps and Derivatives Association, Inc. (ISDA) today issued the following statement in order to ensure an accurate understanding of how credit events are determined for credit default swaps contracts. Today’s statement is intended to underscore key points articulated in the Greek Sovereign Debt Q&A, updated on October 31, which discussed this issue with regards to the Eurozone proposal for Greek debt.  Some media accounts of the information contained in the Q&A inaccurately described the credit event process.

The determination of whether a credit event occurs under CDS documentation is made by the relevant ISDA Determinations Committee (DC), which consists of 10 sell-side and five buy-side firms.  ISDA serves as secretary to, but does not sit on, the DC.  A supermajority of votes (12 of 15 DC members) is required to find that a credit event has occurred without the decision being subject to external legal review. A weaker majority decision would be subject to external legal review that might overturn such a determination. 

The DC’s review of a potential credit event comes after a proposal has been announced and its final terms are publicly available and only if a market participant requests the DC to take up the matter.  Neither of these has yet occurred with regards to the Greek sovereign debt situation.  No debt issued by the Hellenic Republic has been modified to date, nor have the formal terms for any such modification under the Eurozone proposal yet been released.  No market participant has yet made such a request to the DC.

When the DC does review a situation to determine whether a credit event has occurred, it does so using publicly available information and according to the terms of the ISDA Credit Derivatives Definitions.  The Definitions specify that for a credit event to occur, a restructuring must be binding on all holders of a particular bond or loan.

Based on what we know now, it appears from news reports that the Eurozone proposal involves a voluntary exchange that would not be binding on all holders. As such, it does not appear to be likely that the Eurozone proposal will trigger payments under existing CDS contracts. However, whether or not it does so will be decided by the DC on the basis of the specific facts, if a request is made to them.

More information on the credit event process and the ISDA Determinations Committee is available in the Greek Sovereign Debt Q&A at on the ISDA website and on the Determinations Committee section of ISDA’s website at

For More Information, Please Contact:
Lauren Dobbs, ISDA New York, +1 212 901 6019,
Rose Millburn, ISDA London, +44 203 088 3526,
Donna Chan, ISDA Hong Kong, +852 2200 5906,


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Mon, 10/31/2011 - 13:55 | 1829041 GeneMarchbanks
GeneMarchbanks's picture

Semantics it 'appears'

Mon, 10/31/2011 - 14:00 | 1829073 Oh regional Indian
Oh regional Indian's picture

I don't there has been a successful example of self-policing in recent human history (2000 years or so).

The Determinants are a joke. The world of busyness is mad. This contextual advertising is driving me nuts too. I know Hobby King sells the Stable Sor Air or the other for $65.97.

Everything is currently tending to swing too far on the wrong side. We will make a brief halt at the top of the swing though, all too ephemeral, eye of a fast travelling storm...

ISDA. Institute of Self Determined Asshats.


Awesome Art

Mon, 10/31/2011 - 14:18 | 1829178 Ahmeexnal
Ahmeexnal's picture

Bondholders take "voluntary" circumcision.

Mon, 10/31/2011 - 14:32 | 1829249 Hard1
Hard1's picture

Repeat after me:   This is not a credit event.  This is NOT a credit event!!


(I dunno what would a credit event would be)

Mon, 10/31/2011 - 15:06 | 1829374 malikai
malikai's picture

Isn't the better analogy "50% haircut or I commit suicide"?

10 sellside firms vs 5 buyside firrms? Who the fuck would sign up for that?

Mon, 10/31/2011 - 14:01 | 1829081 Clueless Economist
Clueless Economist's picture

The #OWS cretins are claiming that the NYPD is dropping drunks off in Zuccotti Park to cause trouble.

These moroms can't tell their the angry drunks from their fellow morons.

They need to clean that park out NOW.

Mon, 10/31/2011 - 14:05 | 1829107 NotApplicable
NotApplicable's picture


Mon, 10/31/2011 - 14:22 | 1829207 DoChenRollingBearing
DoChenRollingBearing's picture

Clueless, Not,

Greens for you.  Ha ha!

Mon, 10/31/2011 - 14:10 | 1829116 Mercury
Mercury's picture

There have also been reports that Goldman Sachs is parachutting in scores of gender studies majors, street puppets and dirty hippies in an attempt to make OWS look like a bunch of shiftless and disorganized weirdos.

Mon, 10/31/2011 - 14:39 | 1829273 nonclaim
nonclaim's picture

If they dropped a large bag of FRNs right in the middle we would see if this OWS demands are for real. It would be a truly enjoyable moment and would cost GS lunch money at best.

Mon, 10/31/2011 - 15:21 | 1829430 kaiserhoff
kaiserhoff's picture

It "appears" that my dick is 24 inches long.

Oh hell, that's the ruler I use for fishing.

Mon, 10/31/2011 - 14:19 | 1829193 john39
john39's picture

why?  worried about something?

Mon, 10/31/2011 - 15:55 | 1829372 Loose-Tools
Loose-Tools's picture

Clueless, I see you have spread your cheeks and inserted your head again. Are you the resident Cro-Magnon here at ZH?

Mon, 10/31/2011 - 14:02 | 1829086 vast-dom
vast-dom's picture

A bona fide mess. No way this will get through in the end without violence. And violence generally ain't exactly semantics.

Mon, 10/31/2011 - 15:52 | 1829553 Balmyone
Balmyone's picture

If you're managing a fixed income portfolio at a big bank, and you held Italian, Spanish, Irish, or Portguese Debt, wouldn't you be SELLING since CDS is completely useless.

Mon, 10/31/2011 - 19:42 | 1830109 Buck Johnson
Buck Johnson's picture

It sure is, our Western banking system is becoming a joke pure and simple.  When you don't like how the game is being played against you, change the rules.  You know things are bad when this happens.

Mon, 10/31/2011 - 13:55 | 1829044 gojam
gojam's picture

Voluntold !

Mon, 10/31/2011 - 14:05 | 1829104 CClarity
CClarity's picture

 However, whether or not it does so will be decided by the DC on the basis of the specific facts, if a request is made to them.

So someone make a request already!

Mon, 10/31/2011 - 13:56 | 1829045 Forgiven
Forgiven's picture

Back to work you lazy slaves!

Mon, 10/31/2011 - 13:57 | 1829046 Mercury
Mercury's picture

So.....sovereign CDS still trades because....?

Mon, 10/31/2011 - 13:58 | 1829057 GeneMarchbanks
GeneMarchbanks's picture

For show.

Mon, 10/31/2011 - 14:04 | 1829090 Divided States ...
Divided States of America's picture

Looks to me like ISDA is covering their own asses in case shit hits the fan. Wiping shit off your face dont mean you are now clean, especially when flies starts buzzing around you and no one wants to get near you because of the wreakness you possess.

And for sure, ISDA will be releasing many many more statements like this going forward.

Mon, 10/31/2011 - 21:55 | 1830489 FlyPaper
FlyPaper's picture

Well, when things don't go well for Bankers, they get someone to change the accounting to keep them afloat. (check).

Then they influence the regulatory body (this is only a pretend one) to make preverse decisions to further their misdeeds.  (check)

And when that doesn't work they go to the public and politicians, who depend on these morons for poly-contributions to vote them money (check)

And then the steal money from their clients and move it offshore in a way that is difficult to track.  (Check).

Then, if they are small enough the go belly up.   But if they are big enough and too well connected, then the Central Bank bails them out with funny money.  (check)   [Apparently MF Global is not too big to fail].

Time to make your voice heard.  This is total crap.



Mon, 10/31/2011 - 14:40 | 1829280 drivenZ
drivenZ's picture

If you don’t take the deal then your CDS is ok. If you do take the “voluntary” deal then you’re out of luck…As an aside, you don’t need to sit and wait for a credit event on a CDS you can get out and take your gains. 

Mon, 10/31/2011 - 15:41 | 1829523 kaiserhoff
kaiserhoff's picture

Same reason title and mortgage insurance still sell.  Sabe dios.

Mon, 10/31/2011 - 13:56 | 1829047 Ivanovich
Ivanovich's picture

This would appear good enough to cause the obligatory afternoon ramp up.

Mon, 10/31/2011 - 13:59 | 1829050 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

Shove the 50% 'voluntary' hair-cut... and collect 100% on the CDS. THAT'S WHAT IT'S FOR! If you didn't purchase it for circumstances like these, then what did you purchase it for!?

Mon, 10/31/2011 - 14:04 | 1829095 No One
No One's picture

Obviously to enhance the profitability of those firms sitting on the ISDA Determination Committee. It does appear to a commoner like me that a Best Buy extended warranty may provide more value than CDS contracts on Sovereign Debt.

Mon, 10/31/2011 - 13:57 | 1829051 Joebloinvestor
Joebloinvestor's picture

In other words, the patient isn't dead until they determine it is.

A rotting stinking corpse doesn't matter.

Just the agreement, and then it is subject to argument.


I think a 50% "haircut" is an event fellas.

Mon, 10/31/2011 - 13:57 | 1829052 Cursive
Cursive's picture

ISDA:  Female anal porn "appears" voluntary

Mon, 10/31/2011 - 14:12 | 1829143 Lets Eat Grandma
Lets Eat Grandma's picture

The way those bond holders were flaunting their CDS, they were just asking for a 50% haircut.

Mon, 10/31/2011 - 14:48 | 1829310 Ropingdown
Ropingdown's picture

The eurozone governors wish to eliminate CDS trading on sovereigns.  The amazing thing is that the ISDA spokespeople appear to be going along with that wish, willing to throw away the entire sovereign CDS market.  We know Trichet threatened to allow a 100% default if IIF didn't accept a 50% default. It is exactly as if a rapist with a 9mm pistol said to a woman "Agree to take off your clothes and have sex with me voluntarily, or I'll shoot you."  As for insisting on the haircut ONLY for private holders, I can only call that criminal, the sovereigns of Europe expropriating the wealth of the pension funds and insurance companies.  Suppose the USA made that offer on US T's.  Think about it.

Mon, 10/31/2011 - 21:58 | 1830500 FlyPaper
FlyPaper's picture

Bankers extort governments; governments extort bankers.    I think the governments are getting the short end of this deal!

Mon, 10/31/2011 - 13:57 | 1829053 tim73
tim73's picture

Is there such thing as a honest Greek taxpayer. It seems everybody and his cousin Vinny (still dead since late 80's) are on the take there. 8 billion dollars worth of pension frauds. One huge crooked and corrupted cesspit.

Mon, 10/31/2011 - 14:01 | 1829084 NotApplicable
NotApplicable's picture

There's no such thing as an honest tax, therefore your question is moot.

Mon, 10/31/2011 - 14:03 | 1829097 Oh regional Indian
Oh regional Indian's picture

Every "country" has been infected with a fatal flaw. With Greece, it's Taxes. With India it's corruption. WIth Germany it's fastidiousness. With America is Manifest Destiny/Jingoism. With England it's Alcohol/Football.

Cesspits all.


Mon, 10/31/2011 - 14:06 | 1829113 DoChenRollingBearing
DoChenRollingBearing's picture

ORI, some places are worse than others, trust me on this one.  Ever been to Pakistan?  I would like to hear your observations of THAT country.

Mon, 10/31/2011 - 14:12 | 1829145 Oh regional Indian
Oh regional Indian's picture

Never been DCRB, only heard First HAnd experiences. Truth is, in most ways except dominan religion, we are the same and similarly conditioned by the brisith.

I think I'd feel right at home in Pakistan. :-)



PS: It's really bad here in India. Prevelant, dominant, leech on the system. Egrigious too.

Mon, 10/31/2011 - 14:21 | 1829202 DoChenRollingBearing
DoChenRollingBearing's picture

That's too bad ORI about India being so bad.

Look around on some of the other threads to see my comments on Jon Corzine!

Sounds like he would fit right in with your local kleptocracy!

Mon, 10/31/2011 - 14:54 | 1829337 DogSlime
DogSlime's picture

edited for bad taste


Mon, 10/31/2011 - 14:11 | 1829137 slaughterer
slaughterer's picture

I think according to Greek law, even the recipients of the Greek pension funds that received the 50% haircut as well do not have a legal right to protest the haircut.   

Mon, 10/31/2011 - 14:45 | 1829291 Shirley Wilfahrt
Shirley Wilfahrt's picture

I'm assuming you are in USA.

Do you really still believe that the USA is in any better shape behind the statusquo curtain?

I know. I still don't want to believe...even though it is right in front of me....but that is just the MSM programmed debt monkey on my shoulder. He's a lying fuck. 

Mon, 10/31/2011 - 13:58 | 1829055 Josh Randall
Josh Randall's picture

Go long litigation - ISDA won't have the last word by a long shot

Mon, 10/31/2011 - 14:22 | 1829212 john39
john39's picture

the world will be broke long before litigation gets anything resolved.

Mon, 10/31/2011 - 14:04 | 1829065 williambanzai7
williambanzai7's picture

It is basic human nature to want 50 cents on every dollar you invest. That is why so many people literally line up for such deals without being forced.

Everything they teach you in business school is wrong.

And this does go to show what hyper bullshit those ISDA contracts and riders are.

Mon, 10/31/2011 - 14:23 | 1829183 Mercury
Mercury's picture

What kills me is that people actually threw/throw down for a CDS contract that says something like :

The determination of whether a credit event occurs under CDS documentation is made by the relevant ISDA Determinations Committee (DC), which consists of 10 sell-side and five buy-side firms.  ISDA serves as secretary to, but does not sit on, the DC.  A supermajority of votes (12 of 15 DC members) is required to find that a credit event has occurred without the decision being subject to external legal review. A weaker majority decision would be subject to external legal review that might overturn such a determination. 

That would be like holding Kardashian virginity insurance which only pays when her lawyer acknowledges that an "event" has transpired.

Mon, 10/31/2011 - 13:59 | 1829069 TheLooza
TheLooza's picture

What I struggle to understand here is why the resistance to calling this a triggering event.  My understanding is that the net notional Greek referencing CDS exposure is $3.75b. Not a big deal.  Are they working this hard to avoiding calling this a *default* for precedential value because of the high likelihood that this sequence will repeat itself on a much bigger stage (i.e. Italy and beyond)?


Mon, 10/31/2011 - 14:08 | 1829119 RickyBobby
RickyBobby's picture

me thinks yes.

Mon, 10/31/2011 - 16:58 | 1829765 Silver Bully
Silver Bully's picture

'My understanding is that the net notional Greek referencing CDS exposure is $3.75b. Not a big deal'

You can bet (heh) that that $3.75 beelyun CDS exposure has leverage times pi. The greek CDS is held by the major European banks. In turn, the rest of the world is exposed to them. As widely known, the banking sector is one big house of cards.

It may not be a stick of dynamite (Lehman), but I think you would pay very close attention if someone lit that bottlerocket (Greek CDS) superglued to your scrotum.

Mon, 10/31/2011 - 20:14 | 1830190 Hedge Fund of One
Hedge Fund of One's picture

Yes, as I understand, those who sold the CDS sold coverage on many times the notional value. That is how BoA wound up with $75 trillion of underlying derivative value that moved into the bank to use demand deposit accounts as collateral. There are not enough assets in the entire world to support the coverage that was written.


Mon, 10/31/2011 - 14:00 | 1829072 seek
seek's picture

This is like an insurance company refusing to pay on a car accident because you "volunteered" to be in the car when the accident happened.

So.... if your risk hedges don't hedge risks, risk off?


Mon, 10/31/2011 - 14:14 | 1829154 frugalman
frugalman's picture

I was thinking along these lines, that after paying for decades of life insurance, your widow may not be paid because you voluntarily ate too many cheeseburgers..

Mon, 10/31/2011 - 15:00 | 1829360 whisperin
whisperin's picture

What about these CDS's being considered fraudualant contracts? If 50% haircuts won't trigger it did you really sell something or they just inducements of fraud? When do the holders start creaming? Lastly, I wonder if the NY AG will take any action?

Mon, 10/31/2011 - 14:00 | 1829074 LMAO
LMAO's picture

Well, if it's voluntary then why not respectfully decline:

"No thank you!"

Mon, 10/31/2011 - 14:54 | 1829341 UP Forester
UP Forester's picture

'Cuz then they won't be invited to the party on the most recent "private" Greek island with ice sculptures pissing vodka and little 8-year-old boys running around naked "just asking for it....."

Mon, 10/31/2011 - 22:09 | 1830538 FlyPaper
FlyPaper's picture

Dude.  Yuck.

Mon, 10/31/2011 - 14:01 | 1829077 Cdad
Cdad's picture

Well, with a list of criminals like that one, who needs the rule of law?  Just make it up as you go, and make sure your interests top the list...including the interests of...HUMANITY!

Capital will not form in banks as corrupt as those on this list, and so the Greater American Depression will only roll on.

Mon, 10/31/2011 - 14:42 | 1829287 Theosebes Goodfellow
Theosebes Goodfellow's picture

~"Capital will not form in banks..."~

And it's not. Many are figuring out that banks, (save for maybe some credit unions), are not the "best" place for one's capital. Personally I choose a Ruger Alaskan to sit next to mine. Banks aren't the only folks with safes.

Mon, 10/31/2011 - 14:01 | 1829085 navy62802
navy62802's picture

What a joke.

Mon, 10/31/2011 - 14:02 | 1829087 LawsofPhysics
LawsofPhysics's picture

Time to enforce some "voluntary" haicuts around the world.  Paper pushing fucknuts burning down the world, got physical?

Mon, 10/31/2011 - 14:02 | 1829088 CClarity
CClarity's picture

Committee components are absurd.  Makes a mockery of the concept.  And why do they even bother to delineate by region.  Only the consulting members seem to change.

Mon, 10/31/2011 - 14:03 | 1829091 lolmao500
lolmao500's picture

Thai floods, very bullish for the japanese economy...

Mon, 10/31/2011 - 14:03 | 1829096 tim73
tim73's picture

Haircuts will continue until morale improves!

Mon, 10/31/2011 - 14:03 | 1829098 RobotTrader
RobotTrader's picture

Problem:  Eurozone is in tatters, spreads blowing out.

Solution:  Buy RATE and ""



Mon, 10/31/2011 - 14:14 | 1829157 Ahmeexnal
Ahmeexnal's picture

No. Buy silver gulden, lira, escudos, schillings.

Mon, 10/31/2011 - 14:04 | 1829099 oceanview76
oceanview76's picture

"It depdends on what the definition of 'is' is."  - Slick Willie.

Mon, 10/31/2011 - 14:04 | 1829102 earnulf
earnulf's picture

50% is not voluntary, it is being imposed, ergo it's not voluntary.     The only reason some morons are accepting it is that they believe they will at least get their money back on 1 yr GGB's.      

ISDA speak with forked tounge!

Mon, 10/31/2011 - 14:05 | 1829103 DoChenRollingBearing
DoChenRollingBearing's picture

Great job Tyler.  Good digging.  That's why we come here.


Mon, 10/31/2011 - 14:05 | 1829105 FinalCollapse
FinalCollapse's picture

What is going to happen, if say 70% of creditors will take the voluntary haircut, and 40% will resist? Is it default for all, or is it on per case basis? 

Mon, 10/31/2011 - 14:09 | 1829127 tim73
tim73's picture must be one of those algo machine designers at Wall Street? :)

Mon, 10/31/2011 - 14:36 | 1829258 FinalCollapse
FinalCollapse's picture

Oooops - I got caught doing terrible math. I stand corrected 70-30. My apologies to all victims that were hurt. Funny - I have a degree in Mathematics - who knew?

Mon, 10/31/2011 - 15:05 | 1829371 Sig Sauer
Sig Sauer's picture

institution, please?

Tue, 11/01/2011 - 00:35 | 1830858 Hephasteus
Hephasteus's picture

I'm a mathematician not an arithmetician.

Mon, 10/31/2011 - 14:05 | 1829109 Chariots of the Feds
Chariots of the Feds's picture

Soooo if I understand correctly the sane are in the asylum and the insane are on the street

Mon, 10/31/2011 - 14:06 | 1829110 ziggy59
ziggy59's picture

Appearances have been known to be deceiving

Mon, 10/31/2011 - 14:06 | 1829111 SignsAndWonders
SignsAndWonders's picture

Unintended consequence: investors in eurozone sovereign debt require better yields since unclear if CDS will work as a hedge.

Mon, 10/31/2011 - 14:22 | 1829205 Lord Welligton
Lord Welligton's picture

Well yes.

But why would anyone buy any CDS at all.

If the Determination Committee can determine that you voluntarily agreed not to collect.

All yields should rise in the medium term.

Mon, 10/31/2011 - 14:06 | 1829112 gatorengineer
gatorengineer's picture

It is irrelevant as they will get a very low particiaption rate at 50%.......  Why take 50% when you can wait and trigger the insurance when default occurs.......  Vampire Squid have figured this out, and so should Zerohedge readers......

Mon, 10/31/2011 - 14:14 | 1829162 slaughterer
slaughterer's picture

Did MF have EZ sov CDS on their books?  Or was their position in Italian short-terms completely unhedged? 

Mon, 10/31/2011 - 14:17 | 1829175 srsly-wtf
srsly-wtf's picture

Who has to pay if an event is triggered?  Who sold all these CDS's?

Mon, 10/31/2011 - 14:23 | 1829213 Lord Welligton
Lord Welligton's picture

The Determination Committee?

Mon, 10/31/2011 - 14:35 | 1829265 gmrpeabody
gmrpeabody's picture


Mon, 10/31/2011 - 14:09 | 1829124 Bull_Colapse
Bull_Colapse's picture

Is it me or wount the DC just vote in favour of how their own trading book is structuered and then just argue the toss with whoever disagrees?


'Haircut' DECAPITATION is more fitting.

Mon, 10/31/2011 - 14:29 | 1829240 Strider52
Strider52's picture

50% decapitation, laff. What's that, some of your neck is still attached?

Mon, 10/31/2011 - 14:09 | 1829128 Piranhanoia
Piranhanoia's picture

When is the cage match?  Put all these folks in the ring, give them scissors, make them run,  and we may just have a partial solution to removing the embarrasing ring around the tub. The winner will be allowed to stay in the tub as it is sent out to sea from Sendai, anchored a few miles off shore, and nature will do the rest.

Mon, 10/31/2011 - 14:09 | 1829129 Translational Lift
Translational Lift's picture

Cha....When I blew my lunch after reading the headline....that APPEARED voluntary also.....

Mon, 10/31/2011 - 14:11 | 1829130 Sudden Debt
Sudden Debt's picture



Like the firing squad said to the guy tied to the pole in front of them just after they raised their guns:


1, 2, 3!

Mon, 10/31/2011 - 14:11 | 1829136 metaforge
metaforge's picture

[Fade to black. Close Act 2 Scene 3]

The show will go on after these words from our sponsors....

Mon, 10/31/2011 - 14:13 | 1829152 Sudden Debt
Sudden Debt's picture

better wait for those sponsors cheque's to clear.


Mon, 10/31/2011 - 14:16 | 1829168 metaforge
metaforge's picture


Mon, 10/31/2011 - 14:12 | 1829142 tim73
tim73's picture

Germans said, "Accept this or we will buy next ten thousand tax evader names from the Swiss. Your name might or might not be in that list." :)

Mon, 10/31/2011 - 14:12 | 1829147 Madcow
Madcow's picture

Dear Sucka, 

- You sould have known the CDS contract was a fraud before you bought it

- You should be ashamed of your greedy self for wanting to collect

- You got tricked fair and square



The Determinations Committee

Goethe, Fukovski, Yersif and Parnters LP

Mon, 10/31/2011 - 14:15 | 1829164 metaforge
metaforge's picture

There exists 20 times more debt than money with which to pay that debt.  Rearranging deck chairs on the Titanic, bitchez.  Nothing to see here.  You may now resume your regularly scheduled prepping.

Mon, 10/31/2011 - 14:16 | 1829169 Instant Wealth
Instant Wealth's picture

Pimp Politics

Mon, 10/31/2011 - 14:18 | 1829182 Lord Welligton
Lord Welligton's picture

OK. Stupid question.

If Sovereign CDS contracts don't pay out. What's the point of the market?

And what does this mean for corporate CDS? Will they now be voluntary also?

This is beyond the looking glass.

Mon, 10/31/2011 - 14:19 | 1829187 Troy Ounce
Troy Ounce's picture



I am still trying to figure out who at ISDA threatened Jim Rickards a few months ago:

Tue, 11/01/2011 - 00:40 | 1830866 Hephasteus
Hephasteus's picture

Reddit has an offer for information leading to the identity of the female officer who shot the marine in the head with a rubber bullet.

Maybe you should post there. Spread the information far and wide once you obtain it. I think the fancy smansy DOD database has about 90 million usual suspects.

Mon, 10/31/2011 - 14:21 | 1829203 DeadFred
DeadFred's picture

Normally I agree with most of the things I read on ZH so I wonder what I'm missing here. If I had been enough of a gambler to buy Greek debt a month ago at about 100% interest I still see I will be getting 100% interest if I didn't want to go along with the bailout. What I see is a bailout not a credit event. EU steals from the global population to give a preferential exchange of already down-priced (if not marked down on the books) bonds for another sketchy bond. If I don't want to participate I get paid high interest unless they do default, which would be a real credit event. What am I missing?

Mon, 10/31/2011 - 14:22 | 1829208 Big Ben
Big Ben's picture

It seems to me that as long as Greece (with the help of EFSF) continues to make their payments on the bonds, then actually their bonds are not in default. The fact that someone offers to buy your bonds for 50% of their nominal value doesn't mean they are in default. Suppose that I offer to buy my neighbor Jim's US Treasurys for 50%? It wouldn't mean that the US has defaulted on its payments.

However I would expect that the only people who would accept a 50% haircut would be:

1. People with no CDS hedging on their bonds.

2. People who have CDS hedging, but who don't believe that the CDS will pay if Greece misses a payment.

If I was holding Greek bonds with CDS protection and I actually believed the CDS would protect me, then there is no way that I would accept a 50% haircut on them.

The fact that the Europeans expect that a large percentages of Greek bondholders are in categories 1 or 2 speaks volumes about the current state of the financial system.

Mon, 10/31/2011 - 14:27 | 1829232 tim73
tim73's picture

No wonder they hire physicist at Wall Street. CDS clearly requires deep knowledge of quantum mechanics. It is both dead and undead at the same time. Triggering affects the state of CDS and you are not allowed to do that.

Mon, 10/31/2011 - 15:06 | 1829373 plantigrade
plantigrade's picture

Schrödinger's CDS

Mon, 10/31/2011 - 14:33 | 1829255 Dr. Gonzo
Dr. Gonzo's picture

Funny how things became "voluntary" when you get locked in a private room and coerced with bribery or when that doesn't work black mail or when that doesn't work torture. Everyone miraculously comes to the same consensus when it's all done.

Mon, 10/31/2011 - 14:34 | 1829257 Catullus
Catullus's picture

"The market is not rigged." -- People most certainly rigging the market

Mon, 10/31/2011 - 14:37 | 1829269 Executioner
Mon, 10/31/2011 - 14:39 | 1829276 Donlast
Donlast's picture

O my. oh my.  The corruption is becoming so blatant as to be comic. Just when are these bankers going to be hung, drawn and quartered?  They are very few; the angry run to millions.  

Mon, 10/31/2011 - 14:40 | 1829283 FinalCollapse
FinalCollapse's picture

The ISDA DC committee consists mostly of CDS sellers (10 out of 15). In order to declare default you need 12 out 15 votes. Great - makes me wonder why they voted in favor of 'no default'. The game was rigged from the beginning. Now it will be up to courts. Under which jurisdiction these CDS fall? If it is Greek courts then they are fucked.

Mon, 10/31/2011 - 14:47 | 1829303 Lord Welligton
Lord Welligton's picture

< CDS Market is finished

< CDS Market is functional

Mon, 10/31/2011 - 14:50 | 1829314 ivars
ivars's picture

All my prediction charts are now in one place without unnecesary text:

Please visit!

Mon, 10/31/2011 - 14:50 | 1829319 you enjoy myself
you enjoy myself's picture

this is exactly why CDS should never have been allowed in the first place, and will eventually bring this whole house of cards down.  it allows investors to leverage like mad, but then get to claim they're hedged or netted out.  but they're not, as the ISDA and the "voluntary" haircut recipients have just demonstrated -- because triggering a credit event is mutually assured destruction as long as the defaulting issuer had enough CDS written against it.

i wouldn't necessarily blame the ISDA on this.  the Greek bondholders are indeed doing this voluntarily, but (with supreme irony) only because the act of trying to collect on their "insurance" would be far worse for them.  it sets off the great CDS domino collapse -- one or more counterparties can't pay out, thereby defaulting, which triggers an event on CDS written against that counterparty....rinse and repeat.


Mon, 10/31/2011 - 15:34 | 1829473 Vergeltung
Vergeltung's picture

^^^^thread winner.

Mon, 10/31/2011 - 14:52 | 1829329 vegas
vegas's picture

I've commented on this before - no need to spell it out again. What gets me is the outright bullshit lying in the face of the facts. As Groucho Marx once said, "you gonna believe me or your lying eyes?"

Mon, 10/31/2011 - 14:55 | 1829348 Watson
Watson's picture

If you don't like the way ISDA's CDS documents define default (and that includes the 'Determinations Committee' and process) nothing stopped you and your counterparty agreeing something else. To me, problem not so much with ISDA as with lazy documentation reviewers.

Mon, 10/31/2011 - 15:00 | 1829359 Bansters-in-my-...
Bansters-in-my- feces's picture

Fucking delusional sock puppets.

FUCK YOU ISDA and your DC Douche bag commitee.

You are ALL cheating thieving no good dirt bags.


Mon, 10/31/2011 - 15:53 | 1829555 Use of Weapons
Mon, 10/31/2011 - 15:55 | 1829565 benbushiii
benbushiii's picture

So let’s understand this a bit further.  Half of my house burns to the ground, but since I must rely on the insurance adjuster (ISDA) to deem it a loss, which he doesn’t, I do not get paid.  The ISDA becomes an Act of God and the insurance contracts / CDSs are never collected on.  This also explains why there was a melt up last week.  Everyone was short Commodities, the Euro, and Equity Index futures in a correlated trade to their Credit Default Swap exposure. 

Mon, 10/31/2011 - 15:57 | 1829570 benbushiii
benbushiii's picture


Mon, 10/31/2011 - 16:23 | 1829670 downtownshuter
downtownshuter's picture

But, but... I was perfectly hedged with my CDS


Sometimes it just doesn't matter how right you are. When TPTB decide you lose, then you lose.

Mon, 10/31/2011 - 16:50 | 1829751 Flakmeister
Flakmeister's picture

Just deserts....

Merkel wanted sovereign CDS's banned, next best thing is have them become effectively null and void.

I fully back her position and only wish we had a leader with the sense to realize that the sovereign CDS serve no financial purpose and the cojones to make them illegal.

Mon, 10/31/2011 - 20:27 | 1830217 Hedge Fund of One
Hedge Fund of One's picture

The CDS did serve a purpose - they gave investors (banks, pension funds, hedge funds, etc.) confidence to buy the bonds and provide funding to Greek welfare state. When the bond values became impaired, the CDS also allowed those investors to include the bonds on their balance sheet at full value, because they were supposedly insured. This helped support the capital ratios and the share prices of investors that were publicly traded. Now, without some form of real insurance for sovereign bonds, who will buy sovereign bonds or at what price will they be bought?

Mon, 10/31/2011 - 20:48 | 1830269 Flakmeister
Flakmeister's picture

Are you that naive?

The European banks have no or minimal capital charges for sovereign debt...

CDS's exist to game the system, the illusion that risk has been mitigated....

Mon, 10/31/2011 - 20:02 | 1830158 Ellesmere
Ellesmere's picture



Mon, 10/31/2011 - 20:35 | 1830238 jasebishop
jasebishop's picture

sounds to me like CDS payouts on an approval by approval basis, meaning to me that they choose who gets a payout and who gets shafted.

Mon, 10/31/2011 - 23:42 | 1830770 EZYJET PILOT
EZYJET PILOT's picture

Max Keiser reckons that even the banks taking a 50% haircut will be paid back on the sly, so no write downs behind the scenes. It's always a win-win for the banks. Evidence here below:

Tue, 11/01/2011 - 00:42 | 1830871 Hephasteus
Hephasteus's picture

Ya that's going to work becaue people haven't woken up and are still in the circle of trust. They are not relentless digging snooping assholes.

Tue, 11/01/2011 - 00:38 | 1830861 FearedDevil
FearedDevil's picture

Voluntary like BofA buying Countrywide.... LOL

Tue, 11/01/2011 - 01:32 | 1830918 honestann
honestann's picture

Default on all fiat debt.
Swear off ALL fiat currencies forever.
Adopt "grams of gold" as monetary standard.

And finally, hang all the predators-that-be and predator-class: the banksters, regulators and politicians.

Tue, 11/01/2011 - 01:34 | 1830921 canuck
canuck's picture

Is it true that banks do not have to hold back capital on government bonds because they are risk free according to Basel I and II and III?

Tue, 11/01/2011 - 03:04 | 1830984 chindit13
chindit13's picture

So many permutations, so little time.  Even less money.

Clearly this is bigger than either net notional or gross Greek CDS, because it impacts the entire CDS market, including those naked long or short CDSs, and those who think they are hedged.  It is little wonder Italy debt fell after ISDA leaned towards non-event, as anyone who had hedged lost that hedge, so will expect a higher risk premium to hold the debt.  A few hedge funds probably have had a rude awakening, too, as outright positions long CDSs might be worthless for all the wrong reasons.

Does even a single bond holder “volunteering” to take a haircut invalidate the “event” across all Greek CDSs?  Suppose Bank A holds both Greek debt and CDS protection.  It is in their interest to refuse the haircut, claim “event” and collect on the CDS.  How are naked CDSs handled?  Does Kyle Bass have to suffer because a couple of Eurobanks volunteered to take a haircut?  Was Bass naïve enough to rely on ISDA to decide whether or not he gets paid?  I doubt it.

Will we ever know who has CDS exposure, both long and short, and are they on the determination committee of ISDA (~100% certainty)?  Can such a conflict of interest, if uncovered, be grounds for a lawsuit?  Does MF Global also hold a short position on CDSs, which given Corzine’s propensity to lever up, seems likely?

Are CDSs now going to fall into the purview of Nigerian 419 scammers, since most reasonable people now know better than to rely on them?

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