About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

US Department of Justice Scrutinises Markit’s CDS Activities

Subscribe to our newsletter

Regulatory scrutiny of the derivatives market is at an all time high following the financial crisis and the desire of the regulatory community to be seen to be taking the issues raised by the crisis in hand. Most recently up for investigation is data provider Markit Group, which is currently under investigation by the US Department of Justice’s (DoJ) Antitrust Division.

Although there is some degree of confusion about exactly what the DoJ is investigating, it is largely assumed that the London-based derivatives data specialist is being scrutinised regarding its ownership structure and pricing practices. There has also been speculation by some that the vendor’s pricing practices for its RED codes are also under the regulator’s gaze, but this has not been confirmed. For now, it seems that the US investigator is seeking to determine whether the bank owners of Markit, which include JPMorgan Chase, Bank of America, Goldman Sachs and Royal Bank of Scotland, had unfair access to price information.

The data provider is a big player in the credit derivatives market in terms of providing valuations and its core pricing model is based on contributions from its client banks. The opaque nature of these markets has been a target for many regulators over recent months, see for example the proposals to move all credit default swaps (CDS) onto regulated trading platforms. The DoJ investigation is likely another attempt by regulators to increase its understanding of and transparency around the space.

The anonymity of the market is, however, a dangerous area to target with regards to full transparency. By forcing full disclosure of pricing by specific contributors, the regulator would effectively drive the business out of the market.

The result of the investigation is understandably being closely monitored by all in the valuations space and the secrecy of the procedures have added momentum to the Chinese whispers going across the industry. The concern of many of those in the space is that Markit may become a victim of the regulatory community’s derivatives witch hunt, thus setting a dangerous precedent for the future.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Potential and pitfalls of large language models and generative AI apps

Large language models (LLMs) and Generative AI applications are a hot topic in financial services, with vendors offering solutions, financial institutions adopting the technologies, and sceptics questioning their outcomes. That said, they are here to stay, and it may be that early adopters of Generative AI apps could gain not only operational benefits, but also...

BLOG

Sales Unplugged: Everything You Need to Know About FinTech Sales – and More

By Michael Walford-Grant They say that in life timing is everything. And so it was that in February 2020, after more than 30 years’ working in sales for financial data management and technology companies, including PolarLake, AIM Software, SunGard and FIS, I decided to start my own sales consultancy. Within a month, the UK was...

EVENT

Buy AND Build: The Future of Capital Markets Technology, London

Buy AND Build: The Future of Capital Markets Technology London on September 21st at Marriott Hotel Canary Wharf London examines the latest changes and innovations in trading technology and explores how technology is being deployed to create an edge in sell side and buy side capital markets financial institutions.

GUIDE

Regulatory Data Handbook 2023 – Eleventh Edition

Welcome to the eleventh edition of A-Team Group’s Regulatory Data Handbook, a popular publication that covers new regulations in capital markets, tracks regulatory change, and provides advice on the data, data management and implementation requirements of more than 30 regulations across UK, European, US and Asia-Pacific capital markets. This edition of the handbook includes new...