Warren Buffett called derivatives weapons of mass destruction, but even the Sage of Omaha has bought a few recently. Today, a European industry body for exchanges made a sweeping generalisation that off-exchange traded derivatives were responsible for the credit crisis, while credit default swaps in particular have attracted the financial services equivalent of UN weapons inspectors. But does the CDS market deserve such hostility?

A barely regulated market that swelled to notional amounts of $62 trillion (€49 trillion) at the start of 2008 does need supervision. To that end, European and US moves to establish central counterparties to manage risks are welcome. But many other proposals are more likely to stifle areas of the CDS market that function smoothly.