The credit default swap (CDS) market is grappling with fundamental changes in the corporate debt landscape that threaten its viability as a hedging tool. Big and bold initiatives are needed to rejuvenate it.

In our latest webinar, we gathered four seasoned chief investment officers at asset managers to discuss how CDS has evolved from a versatile trading product into something still with impact, but far less predictable.

There was a lot to unpack, so we've summarised the key points below.

Here's what every credit trader needs to know.

Want to watch the full session instead? Catch up here.

1. CDS volumes have shrunk

Single-name CDS trading in Europe is only about one 10th of what it was at its highs, according to Nicholas Pappas at Faros Point Capital. The latest DTCC data shows only 26 entities trade with meaningful daily volume globally, observed Mark Rieder from LaMar Assets — adding that, in the Americas, 292 names traded with an average daily volume each of just $11m. "That's minuscule," he noted. European volumes were slightly better — 252 names traded, with 47 trading above $25m daily.

2. Credit events have become rare while documentation stagnates

Orlando Gemes from Fourier Asset Management highlighted the striking absence of credit events in the last five years: "In 2020, we had 19 credit events that resulted in a CDS auction. That has fallen to just two in 2024 and 2025."

Arguably the covid-19 pandemic tipped many borrowers into default, but credit event auctions were common from 2005 to 2020. The sharp decline since led Gemes to ask: "Is it a coincidence the number of credit default events has fallen significantly at a time when LMEs have rapidly proliferated?"

While LME techniques have rapidly evolved, "the documentation for CDS has not changed" since 2014, when ISDA brought out its last reworking of the Credit Derivatives Definitions. This over 10-year gap has created a fundamental mismatch between sophisticated restructuring methods and what CDS contracts were designed to handle.

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3. Altice showed CDS settlement can work, but timing remains problematic

Contracts referencing Altice France ultimately delivered an 87.75% final price that was "in line with where bonds were", as 9fin host and editor Dan Alderson noted. But the EMEA Determinations Committee (DC) experimented with new procedures (ISDA’s proposal for handling locked up bonds in credit events) before abandoning them entirely.

Clark Nicholls from Aucit Investment Management acknowledged the DC needed to deal with locked up deliverables, but questioned the approach, arguing the auction may have settled a lot more contracts if the DC had acted sooner. As it was, only €38m was delivered — a tiny fraction.

The wait for the DC to call a trigger also had real costs for investors, as Pappas explained: "If you're an investor, you own CDS, and you paid 20 points up front for the March [expiry] date, and then suddenly it doesn't trigger until June, you just lost 20 points."

Despite this, referencing Altice France secured debt helped CDS achieve a reasonable outcome. This could be different for Altice International, where CDS references unsecured bonds. There the CDS/bond package trades well below par around 75, which Pappas interpreted as "basically saying there's a very high risk that CDS is not going to work".

9fin first identified Altice France distress signals via our proprietary watchlist in 2023. Our team has since published over 110 pieces tracking every stage of the restructuring, giving clients actionable intelligence unavailable anywhere else. Get the full timeline here.

4. Ardagh highlights technical versus economic reality gap

The Ardagh situation crystallises a key problem facing CDS. Nicholls noted many elements where "if you asked the man in the street and explained what a default was... 99% would agree".

The situation is coercive and leaves senior unsecureds material worse off, he added. Yet the Determinations Committee took a different view, arguing there is not yet a binding aspect such as assignment, arrangement or scheme — despite the high creditor support levels and earlybird deadline having passed.

This leaves big uncertainty about when CDS will trigger and if any deliverables will remain. If the Ardagh exchange execution is delayed, this could also mean that September and December CDS contracts could expire worthless.

5. European legal complexity

Europe's fragmented legal landscape creates other uncertainties. As Pappas explained, the timing of CDS triggers varies a lot across jurisdictions.

6. User confidence is eroding

The repeated failures are taking their toll on market participants. Pappas described the user experience: "Someone buys an insurance policy... and the insurance policy then doesn't pay out, but you've spent money on this." The impact on trading appetite is predictable: "Each of these things happen, people say they're never going to use CDS again."

What comes next for credit protection?

The panelists believe the market wants CDS to work and that solutions exist. Rieder suggested "the scaffolding is there, it just needs to be bolstered". Key fixes include updating documentation to match current market practices, reconsidering the 90% consent threshold that makes restructurings "voluntary", and ensuring deliverable packages include equity when debt converts.

As Gemes concluded: "We need to have contracts that are consistent with what's going on in the underlying markets."

Don't get caught off-guard by the next Altice or Ardagh. 9fin's comprehensive data and coverage of restructuring developments, legal proceedings, and credit market dynamics gives you the edge you need in today's unpredictable environment. Start your free trial today.