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The impact of trade reporting and central clearing

Published August 6, 2019

Credit Default Swap (CDS) is blamed for its role in the 2007-08 global financial crisis. New regulation on derivatives markets is needed to prevent risks to the financial system, promote the efficiency and transparency of these markets, and avoid market abuses.

Credit Default Swap (CDS) is blamed for its role in the 2007-08 global financial crisis. New regulation on derivatives markets is needed to prevent risks to the financial system, promote the efficiency and transparency of these markets, and avoid market abuses.

New policies, such as the Dodd-Frank Act passed in 2010, are implemented to regulate the market. In her newly published paper titled with “The impact of trade reporting and central clearing on CDS price informativeness”, Dr. Lu Zhu studies the effects of the introduction of central clearing on informed trading in the CDS market. The paper finds that the CDS market has become less of a “hidden” trading venue for informed investors since central clearing and trade reporting started.  The results support the argument that higher transparency reduces the level of informed trading. The paper has been presented at many influential national and international conferences, including the U.K. Financial Conduct Authority research seminar.

Lu Zhu "The impact of trade reporting and central clearing on CDS price informativeness" Journal of Financial Stability  Wednesday, July 17, 2019