In its draft form, the 2005 Delphi CDS Index Protocol allows investors to change from a physical to cash settlement. In the past, almost all contracts were based on physical delivery, but because the sheer size of transactions prompted by Delphi, cash settlement would make the process much more efficient. In addition, the protocol will improve legal clarity, as there are a large number of unconfirmed trades.
Isda also scheduled a multilateral bond auction to determine the final price of certain Delphi bonds. Both market and limit orders are to be submitted simultaneously. The auction is for dealers only, but market participants – regardless if they opt-in to the protocol – can place their orders indirectly through a dealer. The auction will be held on Thursday, November 3.