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NEW YORK, Aug 1 (Reuters) - Emerging market credit default swaps trading volume rose 40 percent in the second quarter of this year, reaching $389 billion, versus the same period a year ago, a survey showed on Friday.
However, EMTA, the emerging markets debt trading and investment industry trade association, said in a statement that volumes were down 5 percent from the first quarter of this year.
"With better market tone in the second quarter versus the first quarter, and with overall volatility on the decline during the period, it was not surprising to see an almost across-the-board drop of sovereign CDS activity," David Spegel, global head of emerging market credit research at BNP Paribas in London, said in a statement.
Credit default swaps, or CDS, act as a kind of insurance for investors who own debt, in this case debt issued by sovereign nations, against potential default or restructuring.
Argentina CDS trading volumes, however, bucked the trend in the second quarter.
"Given the nearing risk of a default from Argentina, it was also not unexpected to see the 68 percent quarter-on-quarter jump in Argentine trades," Spegel said.
On Friday, the International Swaps and Derivatives Association's (ISDA) 15-member Determinations Committee confirmed that Argentina had failed to pay on its debt and that it went into default on Wednesday.
The vote by the ISDA-facilitated committee requires a supermajority of 12 of the 15 members to vote in favor of a ruling, which in this case decided that a credit event had indeed occurred when Argentina missed a coupon payment on July 30.
Brazil's CDS contracts were the most actively traded in the second quarter at $74 billion.
Russian CDS traded up 163 percent in the second quarter versus the same period a year ago, registering $62 billion. However, Russian volumes were down 12 percent from the first quarter of the year. Mexico was third at $45 billion.
The survey of 13 major dealers included Chilean CDS contracts for the first time. Additionally, the survey included the tracking of nine corporate emerging market CDS contracts.
Russia's state-owned energy company Gazprom was the most traded at $3.6 billion, followed by $3.1 billion for Mexico's state-owned oil company, Pemex. Brazil's state-owned oil company Petrobras was third with $2.4 billion in contract trading volume. (Reporting by Daniel Bases; Editing by Dan Grebler)