Wed, Apr 25, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

AIMA warns of economic impact of EU naked CDS ban

Monday, March 07, 2011
Opalesque Industry Update - EU policymakers should consider the economic impact of potential restrictions on credit default swaps in sovereign debt. That’s according to the Alternative Investment Management Association (AIMA), the global hedge fund association.

The warning comes ahead of a key vote in the European Parliament’s Economic and Monetary Affairs Committee today, which is expected to consider amendments imposing severe restrictions or bans on uncovered (or ‘naked’) credit default swaps in sovereign debt.

AIMA CEO Andrew Baker said: “AIMA fully supports the reform of the derivatives markets, including the introduction of central clearing of OTC derivatives, greater transparency as well as full disclosure of positions to regulators. However, it makes little sense to single out one particular derivative contract. There should be recognition of the fact that the market cannot function properly without liquidity providers who may enter in and out of the contract without hedging any underlying risk exposure.

“The political positions that stated that sovereign debt woes were caused by or exacerbated by activity in CDS markets were taken before any hard evidence became available. Ever since, the data coming out of the European Commission, the German central bank as well as a great number of academic sources shows there is no evidence of market failure in the CDS markets, let alone any evidence that those who bought protection without owning the underlying bonds were somehow pushing down the prices of sovereign debt.

“If a ban or restriction on entering into net short positions via sovereign CDS was to be enacted it would affect the efficient functioning of global debt markets and have far reaching and substantial negative consequences. Debt markets would be less efficient, liquid and transparent. The cost of borrowing would increase and the availability of credit to borrowers would decrease, with a concomitant negative impact on growth and jobs.”

(press release)

Source

kb

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Sequoia takes Facebook stake as shares slide in data controversy, $1.4b hedge fund sees intact fundamentals for Facebook, Jim Cramer reveals some 'suggested hedge fund trades' amid the Trump tariffs[more]

    Sequoia takes Facebook stake as shares slide in data controversy From Bloomberg.com: The $4.2 billion Sequoia Fund bought a small position in Facebook Inc. as the stock slid late in the first quarter, investment manager Ruane, Cunniff & Goldfarb told clients. "The recent controversy enab

  2. Activist Investors - Blue Sky-owned Wild Breads faces uncertain future[more]

    From AFR.com: A Blue Sky private equity investment in artisan-style baker Wild Breads enjoyed multiple valuation upgrades despite losing millions and breaching its lending covenants, accounts lodged with the regulator last week show. Wild Breads lost $2.4 million in 2017, but Blue Sky ascribed a hig

  3. Opalesque Exclusive: Barnegat to close hedge fund to outside investors on weak opportunities[more]

    Komfie Manalo, Opalesque Asia: Bob Treue's Barnegat Fund Management said it is closing its $666m fixed income relative value hedge fund to outside investors. "The negative side to gains in Fixed Income Arbitrage is that unless we find new opportunit

  4. Investing - Hedge fund makes a big bet on malls, British hedge fund manager Odey short UK government bonds on QE bet[more]

    Hedge fund makes a big bet on malls From Barrons.com: The dominant narrative on American shopping malls is that they're dead. Crushed by Amazon.com, many brick-and-mortar retail stores are destined for bankruptcy. And where is the most retail, clustered all together? Malls. From a

  5. Performance - Hedge funds suffer first back-to-back loss in two years, Netflix performance burns hedge fund short sellers, Macro hedge fund up 14.5% in first quarter sees dollar falling, Renaissance Technologies rebounds across hedge funds in March[more]

    Hedge funds suffer first back-to-back loss in two years From Bloomberg.com: Hedge Fund returns sank for a second straight month in March, the first back-to-back loss since the first two months of 2016, as trade wars, tech-sector woes and a Fed rate hike dragged down the S&P 500 from its