This week, the International Swaps and Derivatives Association (ISDA) held a series of auctions to determine the pricing for the settlement of credit default swaps (CDS) referencing Iceland’s three major banks – Landsbanki Islands hf , Glitnir Banki hf, and Kaupthing Banki hf – for parties agreeing to settle those CDS through ISDA’s settlement protocol process. The banks were seized by Icelandic regulatory authorities, thereby triggering required payments of CDS and the first ever CDS cash settlement auctions in Europe, which were all administered by Creditex Group Inc. and Markit Group Ltd.

Based on calculations by the Depository Trust & Clearing Corporation (DTCC), the notional value of net exposures in the CDS market are $1.8 billion for Landsbanki, $2 billion for Glitnir and $3.8 billion for Kaupthing, for a combined total of $7.6 billion. Based on the combined recovery values of the CDS of the three banks, sellers of credit protection are expected to pay out approximately $7.3 billion on November 20.

According to the final results of the auction for Landsbanki CDS held on November 4, the recovery value of the CDS on senior debt was set at 1.25% of notional value and at 0.125% for subordinated debt. The sellers of credit protection referencing Landsbanki will therefore pay out 98.75% of the senior debt they agreed to cover, and 99.875% of the subordinated debt.

According to the final results of the auction for Glitnir CDS held on November 5, the recovery value of the CDS on senior debt was set at 3% of notional value and at 0.125% for subordinated debt. The sellers of credit protection referencing Glitnir will therefore pay out 97% of the senior debt they agreed to cover, and 99.875% of the subordinated debt.

According to the final results of the auction for Kaupthing CDS held on November 6, the recovery value of the CDS on senior debt was set at 6.625% of notional value and at 2.375% for subordinated debt. The sellers of credit protection referencing Kaupthing will therefore pay out 93.375% of the senior debt they agreed to cover, and 97.625% of the subordinated debt.

In addition to the auctions held for the Icelandic banks this week, ISDA has coordinated several auctions in the past two months, including for Fannie Mae and Freddie Mac, Lehman Brothers and Washington Mutual.