CFTC 'sharpening and intensifying' focus on intentional CDS market defaults

22 July 2019 9:39pm
The US Commodity Futures Trading Commission’s scrutiny of “opportunistic strategies” to trigger bond defaults is “sharpening and intensifying,” former chairman J. Christopher Giancarlo said this month shortly before his retirement.

Firms have increasingly been engineering defaults to generate payouts instead of trying to avoid them — with a sharp increase in the rate of instances this year, he said in a “CFTC Talks” podcast on July 10.

“Use of these opportunistic strategies in the smaller credit default swaps market is having a significant and disproportionately large impact on the reputation of the broader global derivative markets,” said Giancarlo, who was replaced July 15 by Heath Tarbert. “A few bad apples threaten to tarnish the entire barrel.”