Bank names obstruct single-name CDS clearing

Ice is “working through” wrong-way risk issues, may need to revamp auctions

Wrong-way risk: "The biggest concern on clearing financials," says a credit trader at a NY hedge fund

The dangers of clearing single-name credit default swaps (CDSs) on bank members of a central counterparty (CCP) are impeding efforts to voluntarily clear the product – a bid by the industry to bolster dwindling liquidity – and it could obstruct mandatory clearing of the product, credit traders warn.

One of the threats is that a clearing member might inherit contracts written on itself in the event of a peer bank collapsing, either through the auction process following a clearing member default