Shearman & Sterling LLP | FinReg | US and UK Regulators Issue Joint Statement on Credit Derivatives Markets
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  • US and UK Regulators Issue Joint Statement on Credit Derivatives Markets
    The U.S. Commodity Futures Trading Commission, U.S. Securities and Exchange Commission and the U.K. Financial Conduct Authority have issued a joint statement regarding the use of "opportunistic strategies" in the credit derivatives markets, including but not limited to so-called "manufactured credit events." The agencies expressed concern that the use of such strategies could adversely affect the integrity and confidence of these markets, as well as markets more generally, due to issues related to securities, derivatives conduct and antifraud laws, along with public policy concerns.

    The agencies did not announce any specific actions or initiatives, and did not indicate that the statement was in response to any particular credit event or other market circumstance. The agencies said that, going forward, they will work together in order to prioritize the exploration of means to address these issues, including the solicitation of industry feedback. The agencies also noted that these collaborative efforts would not preclude other appropriate actions related to the use of these strategies.

    This is the second such statement that the CFTC has made regarding manufactured credit events, and follows amendments proposed by the International Derivatives and Swaps Association to the 2014 ISDA Credit Derivatives Definitions to address such events. This is the first time that the SEC and the FCA have issued formal statements related to these events. The statement should serve to remind market participants that regulators continue to pay attention to the issue of manufactured credit events and similar concerns about the credit derivatives markets.

    View the joint statement.

    View the CFTC's previous statement.

    View details of the ISDA amendments.

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    TOPIC: Derivatives