The global economic crisis brought credit default swaps (CDSs) out of the shadows of Wall Street and into the public consciousness. As journalists and academics try to make sense of the economic downturn, CDSs figure prominently in their narratives. Politicians and regulators have taken aim at these complex and, what are perceived as, largely speculative financial plays, believing that this speculation was a major factor contributing to the global economic downturn. As a result, uncovered credit default swaps—and naked short selling— are frequently the target of regulators crafting prophylactic regulations designed to prevent future crises. The U.S. has taken the lead on financial reform, including regulation of CDSs. The Dodd–Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama on July 21, 2010, includes a nascent framework for comprehensive regulation of credit default swaps. This groundbreaking legislation not only significantly changes how CDSs and swaps generally are transacted and regulated, but it also mandates further study of the complex market forces responsible for the global economic downturn that are yet to be fully understood. This Article responds to the legislative call and examines if the Dodd–Frank legislation went far enough in regulating CDSs by examining alternative approaches for regulating CDSs being considered by our European counterparts
