Wed, Mar 29, 2017
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. Opalesque Exclusive: FS Investments launches energy fund[more]

    Bailey McCann, Opalesque New York: $19 billion Philadelphia-based FS Investments has launched a new interval fund which will invest in energy. The FS Energy Total Return Fund is the firm's first closed-end interval fund and will invest opportunistically in energy companies and assets. FS

  2. Hedge fund liquidations in 2016 surpass 2009 levels, new launches decline[more]

    Benedicte Gravrand, Opalesque Geneva: Even as the hedge fund industry's total assets exceeded the $3tln milestone last year, hedge fund liquidations increased. So much so that 2016 had the highest number of liquidations since 2008, claims the latest HFR Market Microstructure Report, re

  3. Hedge funds find no joy in macro as returns lag Trump rally[more]

    From Gulfnews.com: In 2017, macro hedge funds were expected to shine. So far? Not so much. It's been a far from impressive first two months for funds that trade around macroeconomic events. Discretionary funds rose just 0.3 per cent through February, according to Hedge Fund Research Inc., while the

  4. Strategies - Billionaire investor Marc Lasry shares how he's playing markets right now, Classic models are failing FX hedge funds desperate for return[more]

    Billionaire investor Marc Lasry shares how he's playing markets right now From CNBC.com: Buy on the prospect of deregulation. Sell on the enactment of deregulation. That's the strategy that billionaire investor Marc Lasry is implementing, according to an interview with CNBC in Las Vegas

  5. Opalesque Exclusive: Aberdeen makes the case for the lower mid-market[more]

    Bailey McCann, Opalesque New York: Aberdeen Asset Management has released a new paper focused on lower mid-market private equity. According to the paper, this segment of the private equity market is gaining popularity with private equity investors that are looking for multiple expansion and less