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Chastened by past demons, CFTC is quick to call out potential manipulation in credit derivatives

“Fortunately, that’s changing, especially with regard to credit default swaps” writes Bart Chilton for The agency’s statement was clear in saying that manufactured credit events may constitute market manipulation and may severely damage the integrity of the CDS market.This included the use of a particular financial product — the credit default swap — which fuel-injected a spiral into the Great Recession.Not surprisingly, GSO holds more than $300 million in credit default swaps that would pay out in the event Hovnanian defaults.A reliable CDS market can help provide investors with confidence to invest in companies that may otherwise not be able to raise affordable capital.

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