Allegations of collusion over the flow of meaningful, potentially decision-altering market data for credit-default swaps (“CDSs”) appear to have put a spotlight on the large international banks who are the primary dealers of these financial products. Supposedly, these banks employ some behind-the-scenes practices to maintain a price-setting advantage over potential buyers. On September 11, a $1.9 billion settlement was reached that implicated several large, international financial institutions in a supposed scheme to manipulate and limit the availability of timely, reliable, and comparable pricing data for CDSs. However, while this speaks to what is at the heart of the complaints against these institutions, a settlement is of course not a legal admission of guilt, and drawing any definitive conclusions about the alleged practices remains purely in the realm of speculation. But, this speculation raises critical questions regarding the importance and usefulness of transparent and active exchanges for CDSs.
For more information or assistance please contact Patrick Donnelly (Patrick.Donnelly@MarcumLLP.com), member of Marcum’s Financial Institutions Industry Group.
See attached article entitled “Banks Wanted to Keep the CDS Market to Themselves” written by Matt Levine at Bloomberg View for more information: