Credit default swaps to be reported in 30 minutes with deal intent: RBI

The Reserve Bank of India (RBI) on Tuesday said all over-the-counter credit default swaps (OTC-CDS) transactions should be reported within 30 minutes of the transactions to the trade repository, clearly marking the purpose of the transaction, whether it’s for hedging or not.  

The trade repository will be run by the Clearing Corporation of India Ltd. (CCIL).  

"In case a market participant assigns a CDS contract to any other market participant, the market-maker in the assigned contract shall report such assignment to the trade repository of CCIL," the RBI said in a draft guideline on CDS released on its website.  

Participants in the credit derivatives market will be obliged to furnish any information relating to credit derivatives transactions to the Reserve Bank or any other agency as may be specified by the RBI. 

Dissemination of the data by the RBI, or any other agency could be published in public interest, the central bank said.  

Fixed Income Money Market and Derivatives Association of India (FIMMDA) will devise standard master agreements for the Indian CDS market, including credit event definitions and settlement procedures. 

The CDS curve would be valued based on CDS curve published by FIMMDA or a benchmark administrator, or a proprietary model. In case the model is proprietary, the rational has to be published in the notes to accounts.   

Retail users can buy the CDS only for hedging purposes. Non-retail can buy the product for any purposes. The CDS cannot be sold to related parties, the RBI draft guidelines said. 

The market makers would be banks, NBFCs, housing finance companies (HFC) standalone primary dealers, and all India institutions. In additional, protection could be sold by insurance companies, pension funds, mutual funds, alternate investment funds and even by foreign portfolio investors.