Mar 30, 2023
Europe’s Markets Regulator Probing CDS Market After Bank Turmoil
(Bloomberg) -- The European Securities and Markets Authority said it is scrutinizing the market for credit default swaps after recent trading activity amplified turmoil for banking stocks.
“ESMA, together with the national regulators, has been looking into the recent market movements, including in the CDS market,” a spokesman said in response to questions from Bloomberg.
Bloomberg reported earlier this week that regulators are singling out a trade on Deutsche Bank AG’s CDS that they suspect fueled a global selloff on Friday. The contracts can be illiquid, so a single bet can trigger big moves.
Andrea Enria, the European Central Bank’s top oversight official, criticized a lack of transparency in the asset class on Tuesday and called for regulators gathered at the Financial Stability Board to take a closer look at the CDS market.
The International Swaps and Derivatives Association, which represents participants in those markets, pushed back on Enria’s portrayal, citing reforms since the 2008 financial crisis.
“Far from being opaque, regulators now have access to data showing who is trading what, when and in what size,” Scott O’Malia, ISDA’s Chief Executive Officer, said in a statement on Thursday. “Efforts are currently underway to harmonize data reporting rules across jurisdictions, providing regulators with better quality, more consistent data sets.”
(Updates with statement from industry association in fifth paragraph)
©2023 Bloomberg L.P.