Payment on Lehman CDS only around $5.2 bn: DTCC

NEW YORK: Net payments of only around $5.2 billion were made to settle an estimated $400 billion in credit default swaps on the debt of failed investment bank Lehman Brothers, far below what some feared, The Depository Trust & Clearing Corporation said on Wednesday.

DTCC clears the majority of trades in the $55 trillion, privately traded credit default swaps market. Concerns had escalated ahead of Tuesday's deadline to settle the contracts that payments needed to settle losses would wreak new havoc on markets.

Lehman's credit default swaps were valued at less than 9 percent of the insurance sold in an auction last week on Oct 6, after the majority of the bank's assets were sold to Barclays Bank after its bankruptcy, leaving little. This led to concerns that protection sellers would need to accumulate $365 billion to pay for losses on the contracts.

Analysts said these concerns were misplaced, however, because large players in the market, such as dealers and some hedge funds, had both bought and sold protection, subsequently taking both gains and losses on Lehman's default that offset each other.