# Are All CDS Contracts Required to Be Centrally Cleared? ⎊ Path

**Published:** 2025-12-04
**Author:** Greeks.live
**Categories:** Path

---

## Are All CDS Contracts Required to Be Centrally Cleared?

No, not all CDS contracts are required to be centrally cleared, although regulations since the 2008 financial crisis, like the Dodd-Frank Act in the US, mandate it for a large portion of the market. Specifically, standardized CDS contracts between financial entities are generally subject to mandatory clearing.

However, exemptions exist for certain types of contracts, such as highly customized or bespoke CDS trades. Additionally, trades where one of the counterparties is a non-financial "end-user" (e.g. a corporation hedging commercial risk) are often exempt from the clearing requirement.

- [How Does Collateral Management Differ between Bilateral and Cleared Trades?](https://learn.greeks.live/path/how-does-collateral-management-differ-between-bilateral-and-cleared-trades/)

- [Explain the Difference between Bilateral and Centrally Cleared Derivatives](https://learn.greeks.live/path/explain-the-difference-between-bilateral-and-centrally-cleared-derivatives/)

- [What Is the Primary Advantage of a Centrally Cleared DVP over a Bilateral OTC DVP?](https://learn.greeks.live/path/what-is-the-primary-advantage-of-a-centrally-cleared-dvp-over-a-bilateral-otc-dvp/)

- [How Do High-Frequency Trading (HFT) Firms Profit from Exploiting Small Bid-Ask Spreads?](https://learn.greeks.live/path/how-do-high-frequency-trading-hft-firms-profit-from-exploiting-small-bid-ask-spreads/)

- [What Types of Derivatives Are Mandated to Be Centrally Cleared in Major Jurisdictions?](https://learn.greeks.live/path/what-types-of-derivatives-are-mandated-to-be-centrally-cleared-in-major-jurisdictions/)

- [How Do High-Frequency Trading (HFT) Firms Utilize the Detection of Iceberg Orders to Their Advantage?](https://learn.greeks.live/path/how-do-high-frequency-trading-hft-firms-utilize-the-detection-of-iceberg-orders-to-their-advantage/)

- [What Is the Difference between a Registered and an Exempt Security Offering?](https://learn.greeks.live/path/what-is-the-difference-between-a-registered-and-an-exempt-security-offering/)

- [Does Co-Location Create a Two-Tiered Market between Those Who Can Afford It and Those Who Cannot?](https://learn.greeks.live/path/does-co-location-create-a-two-tiered-market-between-those-who-can-afford-it-and-those-who-cannot/)

## Glossar

### [CDS](https://learn.greeks.live/area/cds/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Structure ⎊ Credit Default Swaps, within cryptocurrency derivatives, function as a mechanism to transfer credit risk associated with a specified reference entity or asset.

### [Cds Contracts](https://learn.greeks.live/area/cds-contracts/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Contract ⎊ A Credit Default Swap Contract is a bilateral financial agreement where one party, the protection buyer, pays a periodic premium to the protection seller.

### [Mandatory Clearing](https://learn.greeks.live/area/mandatory-clearing/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Mitigation ⎊ Mandatory clearing, within cryptocurrency derivatives, functions as a risk mitigation protocol designed to reduce systemic risk by interposing a central counterparty (CCP).

## Discover More

### [Is the Funding Rate Calculation Method Standardized across All Cryptocurrency Exchanges?](https://learn.greeks.live/path/is-the-funding-rate-calculation-method-standardized-across-all-cryptocurrency-exchanges/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Is the Funding Rate Calculation Method Standardized across All Cryptocurrency Exchanges?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Machined-Actuator-Assembly-Visualizing-Decentralized-Autonomous-Organization-Governance-Protocol-Mechanism.webp)

No, while the concept is universal, the exact formula, Index Price components, and interest rate parameters vary by exchange.

### [How Does the Concept of "Data Availability" Relate to the Security of All Layer 2 Solutions?](https://learn.greeks.live/path/how-does-the-concept-of-data-availability-relate-to-the-security-of-all-layer-2-solutions/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Concept of "Data Availability" Relate to the Security of All Layer 2 Solutions?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Actuation-Dynamics-of-Near-Zero-Latency-Hardware-Wallet-Seed-Phrase-Retrieval-Mechanism.webp)

Data availability ensures users can access transaction data on L1 to verify the L2 state and safely withdraw funds.

### [Does Margin Apply to All Types of Cryptocurrency Derivatives?](https://learn.greeks.live/path/does-margin-apply-to-all-types-of-cryptocurrency-derivatives/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Does Margin Apply to All Types of Cryptocurrency Derivatives?](https://learn.greeks.live/wp-content/uploads/2025/10/Macro-Visualization-of-Decentralized-Finance-Instrument-Execution-Through-Precision-Derivates-Penetration.webp)

Yes, margin applies to leveraged crypto derivatives like futures, perpetual swaps, and options, but not non-leveraged products.

### [What Is the Relationship between Bond Yields and CDS Spreads for the Same Entity?](https://learn.greeks.live/path/what-is-the-relationship-between-bond-yields-and-cds-spreads-for-the-same-entity/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Relationship between Bond Yields and CDS Spreads for the Same Entity?](https://learn.greeks.live/wp-content/uploads/2025/10/Exotic-Derivatives-Hedging-Utilizing-A-Smooth-Ivory-Sphere-Against-Teal-And-Indigo-Substrates.webp)

Bond yields and CDS spreads both reflect default risk, so they usually move in the same direction.

### [What Is a 'Credit Default Swap' (CDS) and Is There a Crypto Equivalent for Exchange Insolvency?](https://learn.greeks.live/path/what-is-a-credit-default-swap-cds-and-is-there-a-crypto-equivalent-for-exchange-insolvency/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is a 'Credit Default Swap' (CDS) and Is There a Crypto Equivalent for Exchange Insolvency?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Mechanics-of-Decentralized-Finance-Asset-Volatility-Sculpting-via-Synthetic-Derivatives.webp)

A CDS insures against default. Crypto has synthetic equivalents via decentralized insurance protocols where premiums are paid for coverage against smart contract or exchange failure.

### [What Technological Infrastructure Is Required to Be a Liquidity Provider for Crypto RFQs?](https://learn.greeks.live/path/what-technological-infrastructure-is-required-to-be-a-liquidity-provider-for-crypto-rfqs/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Technological Infrastructure Is Required to Be a Liquidity Provider for Crypto RFQs?](https://learn.greeks.live/wp-content/uploads/2025/10/Futuristic-Digital-Asset-Interface-Illuminating-Realized-Volatility-Risk-Hedging-Strategies.webp)

Ultra-low latency connectivity, high-performance automated quoting engines, secure API integration, and resilient risk management systems are required.

### [How Does Leverage Amplify Both Gains and Losses for a Hedge Fund Selling CDS?](https://learn.greeks.live/path/how-does-leverage-amplify-both-gains-and-losses-for-a-hedge-fund-selling-cds/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does Leverage Amplify Both Gains and Losses for a Hedge Fund Selling CDS?](https://learn.greeks.live/wp-content/uploads/2025/10/Macro-Examination-of-Black-Ceramic-Ball-Bearing-Integrated-into-Decentralized-Finance-Ledger-Substrate-Structure.webp)

Leverage magnifies returns on premiums but also magnifies losses, potentially causing a total wipeout if a default occurs.

### [How Do Credit Default Swaps (CDS) Relate to Counterparty Risk?](https://learn.greeks.live/path/how-do-credit-default-swaps-cds-relate-to-counterparty-risk/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do Credit Default Swaps (CDS) Relate to Counterparty Risk?](https://learn.greeks.live/wp-content/uploads/2025/10/Streamlined-Metallic-Derivative-Instrument-with-Translucent-Haptic-Feedback-Mechanism-Highlighting-Volatility-Surface-Contours.webp)

A CDS is a derivative that transfers the credit risk (a form of counterparty risk) of a debt issuer from the buyer to the seller.

### [How Did the Opacity of the Over-the-Counter (OTC) CDS Market Hide Systemic Risk?](https://learn.greeks.live/path/how-did-the-opacity-of-the-over-the-counter-otc-cds-market-hide-systemic-risk/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Did the Opacity of the Over-the-Counter (OTC) CDS Market Hide Systemic Risk?](https://learn.greeks.live/wp-content/uploads/2025/10/Quantum-Entanglement-Visualization-of-Intersecting-Collateralized-Debt-Positions-in-Decentralized-Finance.webp)

Private OTC trading meant no one knew the total risk or who was exposed, causing panic and a credit freeze when losses hit.

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**Original URL:** https://learn.greeks.live/learn/are-all-cds-contracts-required-to-be-centrally-cleared/
