'Big bang' protocol provides wake-up call for CDS market over credit event settlement

A new scheme for adjudicating on credit event auctions, consisting of a centralised committee, will replace the old system of ad hoc decision-making

The credit derivatives industry is set to introduce profound changes to the way it works in the coming few weeks, as bilateral decision-making on credit events is replaced by a centralised system of adjudication. By signing a so-called "big bang" protocol, adherents will agree to settle existing trades through centrally administered auctions for any future credit event.

Cash settlement auctions are a well-established feature of the credit derivatives market, but using them has until now been