AIMA Asks EU Lawmakers To Re-think Naked CDS Regs

Mar 7 2011 | 10:46am ET

An alternative investment management organization is warning EU policymakers to consider the economic impact of potential restrictions on credit default swaps in sovereign debt.

The Alternative Investment Management Association, a global hedge fund association, made the comments ahead of a key vote in the European Parliament’s Economic and Monetary Affairs Committee, 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.”

Baker says data from the European Commission and the German central bank, among other sources, shows no evidence of market failure in the CDS markets.
 
“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,” said Baker. “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.”

AIMA has over 1,200 corporate members based in over 40 countries worldwide. Members include hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms, investors, fund administrators and independent fund directors


In Depth

Q&A: Executive Recruiter Talks Hedge Fund Closures, Hiring Trends

Dec 19 2014 | 6:58am ET

This year, hedge funds have been closing at a rate not seen since the financial...

Lifestyle

Cooper-Hohn Won't Contest Divorce Settlement

Dec 18 2014 | 9:51am ET

The ex-wife of hedge fund billionaire Christopher Hohn will not contest a divorce...

Guest Contributor

Alternative Investment Funds Face A Communications Imperative

Dec 19 2014 | 6:10am ET

A handful of the top alternative investment firms on both sides of the Atlantic...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.