Regulators for the European Union (EU) opened investigations into the credit default swap (CDS) market on Friday, looking into whether 16 investment banks and Markit, the CDS market information provider, had abused a dominant market position or colluded in some way.
Reuters reported that the European Commission (EC) said it had opened proceedings against 9 of the 16 banks and also against CDS clearing house ICE Clear Europe, to see whether competitors were injured by preferential tariffs that ICE had provided to those banks. ICE Clear Europe is owned by exchange operator InterContinental Exchange.
The 16 banks under investigation are JP Morgan, Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Commerzbank, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, HSBC, Morgan Stanley, Royal Bank of Scotland, UBS, Wells Fargo Bank/Wachovia, Credit Agricole and Societe Generale.
Joaquin Almunia, the commissioner in charge of antitrust cases, said in a statement when the action was announced, "CDSs play a useful role for financial markets and for the economy. Recent developments have shown, however, that the trading of this asset class suffers a number of inefficiencies that cannot be solved through regulation alone."