The lack of transparency into the $58 billion Credit default swaps market, which today remains virtually unregulated, poses a high degree of systemic risk to the global financial system. It is characterized by the inability of regulators to: monitor CDS exposure amongst market participants, and the resulting ability to quantify the impact of certain negative events (e.g., credit rating downgrades) on sellers of CDS; and establish standards for capital adequacy and liquidity to provide some measure of stability in the financial system.

The absence of regulatory oversight has significantly reduced transparency into the impact of CDS positions on the overall financial markets and its participants. Currently, the financial markets do not have a mechanism to evaluate the overall exposure to CDS contracts.

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