NY Regulates CDS Market, Gov Urges Fed To Do Same.

Publication: High Yield Report

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Byline: Richard Kellerhals

New York Governor David Paterson said last week that the state of New York will begin regulating the credit default swap market on Jan. 1 and that the federal government should follow suit.

With credit default swaps, the buyer pays the seller periodically in exchange for insurance if a company defaults on its debt. The $62 trillion market for these instruments has gone mostly unregulated since its inception a decade ago. New York's state regulations will affect only about 20% of the entire CDS market.

"Earlier this year, New York was the first state in the nation to mandate certain regulatory control of the subprime lending market, and today's action is just the next step. I urge the federal government to follow New York's lead once again...

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