Credit Default Swaps in UK Law

Leading Cases
  • LIFFE Administration and Management v Pinkava & others
    • Chancery Division (Patents Court)
    • 24 Março 2006

    As I explain later in this judgment, the system which Dr Pinkava devised was found to have a number of different applications, some of which fall outside anything he was specifically asked to consider but all of which are of great interest to LIFFE. It is no answer to say that the inventions the subject of the further applications do not achieve the particular aim or object to which his efforts were directed.

    The lender accordingly goes into the market as a "protection buyer" and asks a "protection seller" to take on the risk of default in return for the payment of periodic premiums. It "swaps" the risk of default for the payment of those premiums. The protection buyer is known as the long trader and the protection seller as the short trader. What amounts to a credit event is a matter for negotiation but normally reference is made to standard ISDA definitions.

    CDSs are quoted and priced in terms of the annualised percentage of the notional principal that the protection buyer must pay. Thus a CDS which is priced at 30 bps means that the protection buyer must pay 0.3 % of the insured principal per annum. If a credit event occurs then the protection buyer ceases paying the premiums and the protection seller must pay an agreed sum (such as the unrecoverable element of the loan) to the protection buyer.

    This is indeed the position with a conventional future, but is not the case with the systems devised by Dr Pinkava. I should also note at this point that the presentation also mentions total return indices as one possible approach. Thirdly, the project was described as "a BAU" launch and IT costs were budgeted at £15,000, that is to say the level of costs associated with the launch of a new but conventional future.

  • Robert Tchenguiz and Another v Rawlinson and Hunter Trustees SA and Others
    • Queen's Bench Division
    • 26 Julho 2013

    In around late 2007, the Oscatello Companies were restructured. A framework agreement providing the basis for the continued operation of the Oscatello Companies was concluded with, among others, the Icelandic bank Kaupthing hf ("Kaupthing"). Kaupthing and certain of its subsidiaries agreed to continue to fund the Oscatello Companies' operations by way of an overdraft facility and other forms of lending, secured over shares in the Oscatello Companies.

    Rather what he says in relevant respect is that the Report was "commissioned" in order to "assist" the Joint Liquidators in formulating their response to the Guernsey Proceedings; that the recovery available to Oscatello was materially different depending on a number of scenarios; and that it was prepared "entirely" to enable the Joint Liquidators and their legal advisors to respond to varying scenarios and to prepare a Defence and Counterclaim.

    In particular, it is noteworthy that Mr Verrill's evidence is that such draft Report was commissioned at a later stage i.e. following a meeting (on 30 November 2010) with — and a specific request by — the Joint Liquidators' counsel for a document providing details of the individuals from R20 who were involved in the transactions referred to in the Oscatello Report (which I understand to refer to the Draft Oscatello Memorandum); and it was provided shortly thereafter on 22 December 2010 to counsel "

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Books & Journal Articles
  • Central clearing for credit default swaps. A legal analysis of the new central clearing regulations in Europe and the US
    • No. 20-2, May 2012
    • Journal of Financial Regulation and Compliance
    • 212-244
    Purpose: The purpose of this paper is to answer a specific research question: How have EU and US regulators translated the idea of central clearing into law? Design/methodology/approach: A meticul...
  • Two-level games and market constraints on politics in Europe
    • No. 43-1, January 2022
    • International Political Science Review / Revue internationale de science politique
    Financial markets understood the Euro crisis as a two-level game. They monitored national politics as a source of both national and European policy. The incentives to conform to the market’s prefer...
    ... ... Worries about default caused investors to sell the bonds of debtors and ... We test this theory by analyzing credit default swaps of eleven countries around fifteen ... ...
  • Credit default swap prediction based on generative adversarial networks
    • No. 56-5, April 2022
    • Data Technologies and Applications
    • 0000
    Purpose: Financial price forecast issues are always a concern of investors. However, the financial applications based on machine learning methods mainly focus on stock market predictions. Few studi...
    ... ... The purpose of this study is toinvestigate the prediction model that can effectively predict credit default swaps (CDS).Design/methodology/approach –A novel generative adversarial network (GAN) for CDS prediction isproposed. The authors take three features into ... ...
  • Perceived guarantees, investor protection and bailout. The case of government‐sponsored mortgage institutions
    • No. 30-5, August 2012
    • Journal of Property Investment & Finance
    • 435-457
    Purpose: This paper investigates the link between equity and credit markets for the government‐sponsored mortgage institutions, Fannie Mae and Freddie Mac, during the period from January 2007 until...
    ... ... investigates the link between equity and credit markets for thegovernment-sponsored mortgage ... the link between equity and credit default swaps. Yet,to the authors’ knowledge this ... ...
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Law Firm Commentaries
  • Commission closes credit default swaps case against banks
    • JD Supra United Kingdom
    The Commission has closed its antitrust proceedings against all 13 investment banks involved in its investigation into the credit default swaps market. The banks involved were: Bank of America Merr...
  • Financial Services and Markets Act 2000 (Short Selling) Regulations 2012
    • JD Supra United Kingdom
    On October 9, the Financial Services and Markets Act 2000 (Short Selling) Regulations 2012 (the Regulations) were published. The Regulations relate to the EU Regulation on Short Selling and Certain...
    ... ... on Short Selling and Certain Aspects of Credit Default Swaps (the Short Selling Regulation). The ... ...
  • COVID-19 Update: Restrictions on Short Selling in the UK and European Union
    • JD Supra United Kingdom
    Background on the Short Selling Regulation - European Union (“EU”) national regulators have regulated the short selling of shares and certain aspects of credit default swaps (“CDS”) since 1 Nove...
    ... ... selling of shares and certain aspects of credit default swaps (“CDS”) since 1 November 2012, ... ...
  • Primary Market Bulletin 47
    • LexBlog United Kingdom
    On 26 January 2024, the FCA published Primary Market Bulletin 47, which focuses on recent developments concerning the UK’s short selling regulation and the Credit Rating Agency UK Market Share Repo...
    ... ... the UKs short selling regulation and the Credit Rating Agency UK Market Share Report for 2022 ... response sovereign debt and credit default swaps: Readers are also reminded that HM Treasury ... ...
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