SEC, CFTC and U.K. Financial Conduct Authority will address credit derivatives issues

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The heads of the leading U.S. and U.K. financial oversight organizations announced that they will collaborate to address concerns in the credit derivatives market.

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The issue at hand deals with manufactured credit events. Jay Clayton, chairman of the U.S. Securities and Exchange Commission (SEC), J. Christopher Giancarlo, chairman of the U.S. Commodity Futures Trading Commission (CFTC), and Andrew Bailey, chief executive of the U.K. Financial Conduct Authority (FCA), issued a joint statement on how the concerns and how to address them.

“The continued pursuit of various opportunistic strategies in the credit derivatives markets, including but not limited to those that have been referred to as ‘manufactured credit events,’ may adversely affect the integrity, confidence, and reputation of the credit derivatives markets, as well as markets more generally,” the agency heads wrote. “These opportunistic strategies raise various issues under securities, derivatives, conduct and antifraud laws, as well as public policy concerns.”

The agency heads said their respective agencies will make collaborative efforts to prioritize the exploration of avenues, including industry input which will address these concerns and foster transparency, accountability, integrity, good conduct and investor protection in these markets.

“These collaborative efforts would not, of course, preclude other appropriate actions by our respective agencies or authority,” they added.

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