Two of Wall Street’s biggest credit-default swaps dealers are considering plans that could help revive trading in a key part of the market — just as an increase in corporate failures is boosting demand for loss insurance, BloombergBusiness reported today. Credit Suisse Group AG and Goldman Sachs Group Inc. may offer better pricing to clients that agree to settle their transactions through a clearinghouse, which can lower the cost of the trades for the banks. Because post-crisis regulations have left the clearing option voluntary in that part of the market, investors have had few incentives to change their practice. That’s caused dealers to increasingly pull back, with Deutsche Bank AG saying last year that it would exit most of the so-called single-name market. The moves by the dealers, which they are making separately, come amid a broader industry push to jump-start a market that’s shrunk 59 percent since the 2008 financial crisis. As part of the changes, the banks are looking to offer a narrower gap between the price at which they agree to sell credit insurance and where they’ll buy it — a difference known as the bid-ask spread. The wider the spread, the harder it is for investors to trade the contracts, and ultimately profit from the trades. Credit Suisse could start offering different pricing for cleared and uncleared swaps as early as January.
