Isda to publish new single-name European LCDS contract

The International Swaps and Derivatives Association (Isda) will publish a new industry-wide standard single-name European loan credit default swap (LCDS) contract. The new contract, to be published on July 30, will be non-callable with the option to be callable.

The dealers are expected to quote the prices for both non-callable and callable types of LCDS, and will begin trading with them from August 6. The new contract will be different to the previous Isda contract, which had the option to be callable only if the underlying loan has been repaid.

“There may be more liquidity in the LCDS market when the new contract is published, because many people have been waiting for the industry-standard contract before getting into the market,” said David Geen, Isda’s European general counsel.

The LevX, the European index that tracks the performance of European LCDS contracts, is expected to roll to a non-callable-only index of LCDS in September (see also: New European single-name LCDS expected soon). Geen expects this to be a significant contributing factor in the market moving towards trading in the non-callable form.

This new contract is a move towards the US-style LCDS contract, which trades only in non-callable LCDSs.