ISDA's Take On Lack Of Greek CDS Trigger: "We Think The Credit Event/DC Process Is Fair, Transparent And Well-Tested"

Tyler Durden's picture

Everyone's favorite banker-controlled CDS determining organization took offense to media reports saying it may be secretive, corrupt, and borderline manipulate if not worse. To wit: "In sum, we think the credit event/DC process is fair, transparent and well-tested.  There’s simply no evidence to the contrary.  Perhaps after today this non-secret secret will be a secret no more."

ISDA's petulant take in its entirety as follows:

Today we were treated to two news stories in two newspapers on one topic:  the process for determining whether a credit event has occurred with respect to Greek sovereign CDS.


On the one hand, there’s The Washington Post:  “For Greece, a critical conference call between London and New York.”  (A follow-up story is here.) On the other hand, there’s The Wall Street Journal’s “Hushed Up: Secret Panel Holds Fate of Greek CDS.”


An important part of the credit event process – and an important element in each story – are the ISDA Determinations Committees (DCs).  The DCs are 15-member panels of representatives from banks and investment firms.  A supermajority (12 of 15) of each DC’s members is required to make a determination.  Here’s how the Post describes the process and the DCs:


“The banks and other investors who buy and sell the swap contracts have agreed to the arrangement as a way to centralize what had been an ad hoc, company-to-company process of deciding whether a credit default swap payment was warranted.


“The committees are set up with competing interests in mind. The group meeting in London and New York on Thursday includes representatives of major European institutions like Deutsche Bank, as well as private investment funds like Blue Mountain Capital, that might have different points of view.


“A supermajority of 12 committee members is needed to make a determination either way, and if the panel deadlocks the issue would be sent to a new group of three outside arbiters. Some 59 cases have gone before ISDA committees so far without follow-up litigation, and only one has been referred to an outside panel.”


Contrast this with the Journal’s take.  First, there’s the headline about a “Secret Panel.”  The DCs are said to be “secretive” and “rarely elaborate on decisions.” “No outsiders can participate in the meeting…No transcript will be made public. When a decision is announced, expected before Monday, the committee doesn’t have to provide an explanation. There is no opportunity for investors to appeal.”  Critics “question the impartiality of the process.”


It’s a bit of a mystery why the story characterizes the process as so “secretive.”  The names of the firms on the DC are public, as are their votes.  The process by which the DC members are selected, and the rules governing the DCs, are also public.  Their decisions are publicly announced.  At times, public explanations for those decisions are provided, but often this does not appear to be necessary (such as when the vote is 15-0).


In addition, the process, as the Washington Post article notes, was built to address conflicts of interest.  The credit event/DC process has worked extremely well for 3+ years.  It has handled dozens of credit events without incurring a single legal challenge.  If a supermajority isn’t reached, the decision goes to a panel of outside experts.  A supermajority has not been reached only twice in all the times the DCs have agreed to consider a question.

Well, that takes care of that. ISDA is now certainly "fair, transparent, and well-tested", and for those who wrongfully feel that a 70%+ bond haircut could possible be an event of default, tough.

Anyone else who wishes to express their feelings on the matter, can respond on ISDA's blog site.

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Kaiser Sousa's picture

I keep telling yall....until we start killing these socipaths they will continue to fuck the people of the world and dare u to do anything about it...
Fuck a mother fuckin bitch ass banker...yeah, I said it and Wii keep saying it.....

Clint Liquor's picture

There is only one financial instrument without counter-party risk, Precious Metals. With everything else, including currency,  there is counter-party risk. Don't play their game.

AC_Doctor's picture

This scum will swing with the rest of the scab banksters.

dark pools of soros's picture

..these are not the defaults you are looking for...

unrulian's picture

...These are not the defaults we are looking for...move along

east paris trader's picture

What % of revenue did the banks just reveal came from CDS writing?  Talk about shitting in your own well ....

Let The Wurlitzer Play's picture

Anyone that is holding Eurpean debt is playing with fire, while juggling knives, while walking under a latter, in front of a black cat, on Friday the 13th - well you get the picture.

Lets just say I am glad I do not own any European debt.


slewie the pi-rat's picture

where do they publish who voted, which way they voted, and what the totals were?

again, this can change as the "politics of the voting EVOLVES" [L0L!!!   i hate that fuking word, BiCheZ!!!]

SillySalesmanQuestion's picture

They probally won't post my comment to them...  ;)

TahoeBilly2012's picture

One day these boys will learn what "fair" really is.

Quinvarius's picture

Sovereign bond dump in 3...2...1...  If you can't buy insurance on the garbage, you can't buy the garbage.  CDS buyers got MF Globaled.

tony bonn's picture

isda is impersonating bernie madoff on behalf of the criminal issuer of the cds....

ebworthen's picture

Hal 9000:  "I see nothing wrong with self-preservation, do you Dave?"

Dave:  "Open the pod bay doors Hal!"

Hal 9000:  "I'm sorry Dave, I can't do that."

Westcoastliberal's picture

The ISDA is "fair and transparent" just as Faux News is "fair and balanced".

bobola's picture

If they are comfortable that the credit situation in Greece is just fine, then they should load up on 1 year Greek bonds, which hit a yield high of 978% earlier today.

Nope, nothing wrong there.

Business as usual.

Nothing to see there...move on.........

Edit; look up the guys who run the ISDA - all ex bankers.  Like they are going to declare a credit event that will cause billions to flow from their ex-employers. 

Nothing to see here...move on...

tpbeta2's picture

What's the problem. If the CDS holders accept it, it's voluntary. If they don't, then they will probably get their CDS paid out.

LookingWithAmazement's picture

Surprise, surprise: Greek haircut/default not a credit event.

DERIVATIVES: ISDA rules against Greek credit event

Told. You. So. Greek default = non-event. Not even a tiny collapse. Boring world we live in.

resurger's picture

Jon Corzine: but i thought i hedged myself against the hair cut in the greek bonds by buying those CDS's!!

ISDA:Fuck .... you will make us go bankrupt Jon!

Jon Corzine: hmmm. i have an idea, how about you dont declare it a credit event?

ISDA: you mean we say that our CDS's are duds.

Jon Corzine: No, you dont declare a credit event and i dont exercise those nukes, lets do the catch 22 and get the real thing gold and silver from those fucking goys!

ISDA: What a true fucking kyke you are!!!

Jon: ^ ^

ISDA: whats the cut?

Jon: 50/50

ISDA: 50/50 done

Jon: am a call Jammie (Stupid mother fuckers)



P.S: that was the American Version, now watch the European version on 100 tonnes of Gold


giovanni_f's picture

Jim Sinclair was right, I suppose.

keeping appearances's picture

I guess PIIGS really do fly!


ejhickey's picture

Everybody knows that the dice are loaded  
Everybody rolls with their fingers crossed  
Everybody knows that the war is over  
Everybody knows the good guys lost  
Everybody knows the fight was fixed  
The poor stay poor, the rich get rich  
That's how it goes  
Everybody knows  
Leonard Cohen

Hedge Fund of One's picture

My comment is awaiting moderation, maybe along with thousands of others. :-)


Lost Wages's picture

Me too. I high-ly recommend writing them while inebriated.

phenry2's picture

CSD's have priced in a 95% chance of default.  So unless they lose 95% of value there is no default.  - Trigonometry Timmy G.

Winston Churchill's picture

Give the Bondholders the weekend to think about it.

They are obviously not that bright ,else how did they buy them

in the first place Cthe bonds that is).

Expect a reaction on Monday.

I predict panic.


chunkylover42's picture

well of course the ISDA is transparent, just ask them.

alfred b.'s picture


....fair, transparent and well-tested??


Just who the hell do they think they are...the fed?

Catullus's picture

Group think a little?

There is a logical fallacy inherent in all this.  That they've unanimously agreed on something does not mean that it's fair or balanced.  This is a great example of Begging the Question. 

Hey guys, answer the basic question: if you take a haircut on a bond, is it a default event or not? If not, we all know where we stand.  That the BONDHOLDERS agreed to take the swap has nothing to do with the CREDIT DEFAULT SWAP holders. Yes, there are people that own the CDS contracts that don't own the bonds.  Despite what the insano left thinks, this is not unscrupulous at all.  Someone could be hedging municipal bond debt and using the sovereign CDS as a proxy hedge. 


SaveTheBales's picture

For all the tea in China, I do NOT see what all the hubbub is about.  Anyone that can sell a CDS after the "50% haircuts are not a default" thing should report to OUR marketing department immediately -- we sell software. You can obviously sell sea water to the Titanic.  We need to talk.

On another note, anyone wanna buy a CDS?  Get 'em while they're hot, Hot, HOT.  Evidently, there are no rules, so just bring me Goldman's quote, and I'll be happy to shave $10mm.  I could use the $380mm fee.  (What're most of us worth -- half that?)  No, no.  We won't lock you into any stuffy Contracts.  They're more like Guidelines.

Honestly, what kind of schmuck would assume that unreserved insurance would ever pay out, since reserved insurance doesn't pay out?  Anyone who buys this trash deserves every penny of his loss.  Anyone who invests with the delusion that "my guys are covered" is a walking Darwin Award. 


Centurion9.41's picture

When revolutions occur, history has shown it's not just the king and his court who are taken out and beheaded.    All the bureaucrats, wealthy allies, and political supporters join them on the jubilee celebration stage.

Save of course fine folks like Warren Buffett and Charlie Munger.  Those brave souls who supported the rape of taxpayers via TARP, etc., for the good of the people.  To save the fine citizens and country from the impact of a financial crisis.   Warren and Charlie didnt support those measures to save the banks or keep Berkshire Hathaway from blowing out.  

Noooo.   Noooo.   Wasn't needed.  Berkshire was hedged and protected with ISDA approved CDS's!

I think many people are coming to more fully understand the French Revolution and why during all revolutions the government workers/bureaucrats are treated just like the kings and political leaders.

I used to not understand how the mob could be so cruel.

Now, I would have a hard time voting "guilty" for anyone in the mob that stormed the Bastille.....

Centurion9.41's picture

On a practical note, this makes the real default calculations and exposure much much simpler.

And I'm sure the real smart money long ago did the napkin calculations on the new game post rule changes.

Oh, and by the way.  The CB's now are looking at numbers in the reasonable trillions range....completely within the digital capabilities of the Ctrl+P & Ctrl-P money game.

q99x2's picture

A credit event is subject to interpretation. What is is still is in an upside down world. Ramifications of such an event shall transpire. The decision will determine whether the fallout shall be healthy or destructive.

How the hell do you join one of these mafia organizatinos. What do you have to do graduate from Harvard?

zippy_uk's picture

As a bill paying member of the committee that decides whether we are to pay the bill we unanimously decided after careful consideration of all the facts that there is no bill to be paid.

As a bill paying member of the committee I feel we came to exactly the right decision based on the facts before us

weyes1's picture

Its a beautiful thing, the destruction of words.

Default. Democracy. Inflation. Unemployed.


You get the idea.

rsnoble's picture

"Fair" and "transparent" from the people that run the ISDA...........JPM and GS. Give me a fucking break!

Coldfire's picture

"In sum, we think the credit event/DC process is fair, transparent and well-tested.  There’s simply no evidence to the contrary.  Perhaps after today this non-secret secret will be a secret no more."

They would say that, but the "ruling" that the Greek default is not a credit event is absurd on its face. There may be a silver lining, though. The fraud-on-crack known as ISDA could well blow itself up by finally killing confidence in the global OTC derivative Ponzi scheme. Keep a good thought.

David Wooten's picture

From this point on, any lender who 'insures' his loans via CDS's is fool who deserves to be separated from his money.

fiddy pence haff pound's picture

Timmie: My plans are progressing perfectly. Next we will chop and cauterise Greece from the Euro and feed them to the Turks. Where's my cat? I like to stroke my cat while making my evil pronouncements.

Lost Wages's picture

Oddly enough, the ISDA still hasn't approved any comments on that blog. ^_^