The single-name credit default swap (CDS) market currently finds itself stuck slap bang in the middle of a particularly nasty Venn diagram, afflicted by overlapping factors that have shrunk liquidity and pushed some market-makers out of the business – unfavourable economic conditions, tougher regulations and uncertainty over new market structures, to name a few.
Bald statistics tell the story well enough. In the second half of 2011, according to data gathered by the Bank for International Settlements, the total global notional value of single-name CDS contracts stood at $18,100bn (see chart 1). By the first half of 2015, this had fallen to $8200bn. Over the same period, the gross value of the market fell from $958bn to $278bn.
