Creditflux Newsletter

Isda has found a great formula for spinning its surveys on the size of the derivatives market.

Last month it hailed the decrease in the notional size of the credit derivatives market as a testament to the industry’s heroic efforts to compress portfolios and improve efficiency.

In the next breath, it said that the growth of interest rate derivatives showed the need for customised risk management solutions in a more uncertain economic landscape.

So now we know what the story will be when outstanding volumes of credit derivatives start to increase again. It will not be because dealers have become blasé about counterparty risk. Perish the thought. It’s because banks have rediscovered the merits of prudent credit management.

In a recent letter to investors, Loïc Fery, chief executive of London-based credit hedge fund manager Chenavari Capital, shed some light on the meaning of Chenavari. He said he had recently learnt that it sounds a little like a word meaning “good swimmer in troubled times” in Farsi. It’s a good story. But really, Chenavari is the name of a hill near Fery’s home village of Rochemaure in southern France.

We have been trying to ignore this issue in the hope that it will go away. But it is no use, the deeply unpleasant acronyms SNAC (standard north American contract) and even STEC (Standard European contract) are catching on. Have traders forgotten that we are supposed to be trying to make credit default swaps more transparent and understandable? This kind of insider-speak does nobody any favours. Just stop it.