LONDON, March 5 (IFR) - The International Swaps and Derivatives Association has proposed a series of changes to credit default swap contracts to fix a series of perceived flaws in the financial instrument.
The main ISDA proposal focuses on ensuring sovereign CDS protection compensates for losses sustained on government bond positions, while a similar proposal for financial CDS is reportedly in the works as well.
The revisions come almost a year after the Greek debt restructuring, when it became clear CDS holders might not receive adequate payouts on protection they had purchased.
"This is part of ongoing work to look at the CDS definitions and see what changes might need to be in light of the events of the last 10 years, and more recently the financial crisis and European sovereign debt crisis," Mark New, assistant general counsel at ISDA told IFR.
"The proposals are going out to ISDA's credit derivatives market practice committee, which any ISDA member with a passing interest in CDS can join and contribute to." (Reporting By Christopher Whittall; editing by Alex Chambers)