We've been talking about more automation in the credit default market for a long time now. Despite official prodding, we've really only seen piecemeal activity toward that goal. On top of that, we're seeing some moves by regulators that might not necessarily be a good idea. Financial News Online notes that New York regulators appear to want to regulate CDS contracts as insurance products. The SEC has certainly taken note of the market. But research firm CreditSights says that perhaps the best solution would be to migrate the market to an exchange and the regulatory apparatus all exchanges carry. It would do a lot toward injecting a regulatory element, creating transparency, setting standards regarding margin and ultimately reducing uncertainty. This strikes me as an opportunity for an enterprising exchange.

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