Regulators put manufactured CDS events in crosshairs

credit default swap CDS 230x150 AS
By GlobalCapital
25 Jun 2019

The US Commodity Futures Trading Commission and the UK’s Financial Conduct Authority have added regulatory pressure to the credit default swap market, pledging to clamp down on manufactured credit events.

Regulators have become increasingly concerned by controversial moves used by some hedge funds, in which companies are encouraged to declare defaults in return for favourable financing terms, leaving the hedge funds themselves to scoop substantial payouts from underlying CDS positions.

In a joint statement issued late on Monday, ...

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