ESMA · ESMA_QA_1952 Answer Published

Uncovered Credit Default Swap - Using a sovereign CDS position to hedge the risk related to another CDS position

Name: Uncovered Credit Default Swap - Using a sovereign CDS position to hedge the risk related to another CDS position: ESMA Q&A — EU Financial Regulatory Q&A
Creator: European Securities and Markets Authority
License: https://creativecommons.org/licenses/by/4.0/

Regulation: Short Selling Regulation (SSR) Regulation (EU) No 236/2012
Topic: Other SSR-related topics
Submitted: 2012-09-13
Answered: 2012-09-13

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Question

May a sovereign CDS be used to hedge the risk under another CDS referring to the same sovereign debt?

Answer

[ESMA70-145-408 SSR Q&A, Q&A 11.2] Yes, it would be legitimate to use a sovereign CDS position to hedge a risk related to another CDS position in so far as the conditions prescribed in Chapter V (in particular Articles 18 and 19) of the DR (Commission Delegated Regulation No 918/2012) are fulfilled.

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This Q&A is published by European Securities and Markets Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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