As First Suggested By Zero Hedge In 2009, Massive CDS Price Manipulation Scandal Erupts, Everyone Implicated

Tyler Durden's picture

Back in March of 2009 Zero Hedge, once again a little conspiratorially ahead of its time, solicited reader feedback on a key topic: CDS pricing manipulation, involving in addition to key cartel banks, such "independent" pricing services as MarkIt. We said: "Zero Hedge has received some troubling info (like there isn't enough)
regarding major pricing discrepancies between certain securities pricing
services. The services include companies such as IDC, Advantage Data,
Markit and others. While I will not disclose which one may be a culprit,
the allegation is that one (or more) are providing substantially above
market pricing levels, specifically as pertains to distressed
securities." Then back in August 2010, we followed up by explaining that it is the ongoing price manipulation scheme, in addition to other factors, that allows Goldman Sachs (and other CDS dealers to a much lesser extent) to constantly generate massive profits from trading an opaque off-exchange product like CDS. It took two years and a month for others to take notice of this inquiry, although naturally not in that slum of corruption and market manipulation, the United States of America, but in Europe. Bloomberg reports: "Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and other 14 other investment banks face a European Union antitrust probe into credit-default swaps for companies and sovereign debt, regulators said. ...The European Commission said it opened two antitrust probes. It will check whether 16 bank dealers colluded by giving market information to Markit, a financial information provider." So while some post flow charts explaining the hilarity behind conspiracy theories, others actually expose the facts that today are a conspiracy and tomorrow are a full blown criminal investigation.

From Bloomberg:

“Lack of transparency in markets can lead to abusive behavior and facilitate violations of competition rules,” said the EU’s antitrust chief, Joaquin Almunia, in an e-mailed statement. “I hope our investigation will contribute to a better functioning of financial markets.”

Global regulators have sought to toughen regulation of credit-default swaps saying the trades helped fuel the financial crisis. Lawmakers in the EU plan to encourage the use of clearinghouses and transparent trading systems. CDS are derivatives that pay the buyer face value if a borrower defaults.
Possible Collusion

JPMorgan, Bank of America Corp. (BAC), Barclays Plc (BARC), BNP Paribas (BNP) SA, Citigroup Inc. (C), Commerzbank AG (CBK), Credit Suisse Group AG (CSGN), Deutsche Bank AG (DBK), Goldman Sachs, HSBC Holdings Plc (HSBA), Morgan Stanley, Royal Bank of Scotland Group Plc (RBS), UBS AG (UBSN), Wells Fargo & Co. (WFC), Credit Agricole SA (ACA) and Societe Generale (GLE) SA will be investigated for possible collusion in giving “most of the pricing, indices and other essential daily data only to Markit.”

The commission said this “may have the effect of foreclosing the access to the valuable raw data by other information service providers.” It said some of the clauses in Markit’s licence and distribution agreements “could be abusive and impede the development of competition in the market for the provision of CDS information.”

The EU will also separately investigate credit default swap clearing and deals struck by ICE Clear Europe with Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley (MS) and UBS.

These agreements have clauses on preferential fees and profit sharing arrangements “which might create an incentive for the banks to use only ICE as a clearinghouse,” the EU said. That may block other clearinghouses from starting up and limit choice for CDS dealers, it said.

And with this done, we next we shift our attention to predicting what headlines on gold and silver market manipulation will look like in 2013. Or we could simply repost some mockery of all those tinfoil hat wearing idiots who dare to challenge the status quo...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
FunkyMonkeyBoy's picture

The bigger and more obvious the crime, the less likely of prosecutions.

This is the new way. All hail the new way.

AN0NYM0US's picture

So while some post flow charts explaining the hilarity behind conspiracy theories,

there should be a warning that the link is to Ritholtz (though I am sure he will appreciate his traffic quadrupling)

CPL's picture

I was just thinking the exact same thing reading through the article.  I suspect we'll even see the laws changes to provide exemptions to certain parties but it will keep the whole legal framework to prosecute who is not in the "click".

rocker's picture

At least somebody is pissed off enough to try to eliminate the problem.  Look at how the treasury and the FED are doing favors for Goldman Sachs. Goldman Sachs is a hedge fund with bank status. Thanks Hank and Ben. This is wrong and totally corrupt to allow.  Otherwise, all hedge funds should be able to go to the discount window.

The U.K. taxed excess CEO profits @50%.  Would we have enough good people to do that here. Loyd Blankfein's 100 million dollar bonus is the result of tax payer funding. We paid for his bonus. All the while he belongs in Jail with Neel Kashkari.

Too Big To Fail is Much Bigger at JPM, GS, C, and BAC.  Will they break them up?  If not, the next crisis will be bigger.

narapoiddyslexia's picture

Here is what Uncle Ben is going to say about it all -

Just like his presser went, so will he continue.

rocker's picture

This crap went down in 2009.  Amazing, two years later.  For most, it is under the rug.  Things that make me go Hmmmm. 

LooseLee's picture

Blankfein belongs in jail? How silly! He belongs at the wrong end of a rope or firing squad!

Dejean Splicer's picture

"who is not in the "click""

I was thinking the same. This is a warning shot to let the evil do-ers know, hands off Sovereign CDS.

But no mention of corporate CDS. Excellent! Net effect on Markit? Paid membership is up 44%.

CPL's picture

That's a good point.  I wonder though if it would open the door to anti-trust and monopoly lawsuits then.  I'm doubting it.  Why would they point at their own assets, the idiots in power need a parachute to jump from the plane.  The "scandal" will be understood by a handful of armchair economists like ourselves and few others.  Most people won't give a crap., all we can all do for it is plan around the mess these dolts have made.


and The Markit thing...I thought that was a website traffic thing like Alexa (sp??).



Caviar Emptor's picture

Warning shot, but they're all in it. Just quells some anger from those who got burned. Looking busy

DeadFred's picture

My prediction is some European commission members are soon going to be buying new country estates.

Hephasteus's picture

So while some post flow charts.

Dirty trick click bait story to some crappy site.

Racer's picture

and in the meantime the out of hours futures fairy waves the magic wand and pushes silly negative futures back to where they belong again and all is well and the bad stuff was all a bad dream

johnnymustardseed's picture

Off with their heads!!!

MarketTruth's picture

Never will happen. The EU needs a billion or two to reinflate their fraudulent market, so the EU will just settle with a very small billion Euro fine and all is well again. Of course these banksters made hundreds of billions of Euro, so call it EU Mafia VIG. Nothing more to see here, no jail time, everyone gets a free pass for a mere 5% of their fraudulent profits while the EU gets more money to keep their own fraud going.

Twindrives's picture

Rope burns on Dimon's and Blankfein's necks are in order. 

Captain Planet's picture

thats a bit mild, dont ya think.

I mean, really, people are starving, and all your gonna do to them is string 'em up?

Dude, get creative...

Dejean Splicer's picture

Let me guess, your movie Vatican Inc. was directed by 'Sal Sunstein' and funded by an 'israeli organization'.

Youri Carma's picture

Good be somtin or could be a gigantic whitewash like done oh so many times before by ridiculous punishment of just a small amount of money payed by the taxpayers anyways.

Silverhog's picture

The cows are gone, the public has been screwed so many times they can't walk straight. Only a revolution could dump this garbage pile now.

spankthebernank's picture

Americans are too fat to revolt.

Zero Govt's picture

all it takes is not paying your tax, on masse ...Game Over Govt easy could it be

tarsubil's picture

That would be easy to prosecute. If we all buy physical PMs and start using them for local ocommerce that is hidden from taxation? Wouldn't that be hard to prosecute?

MachoMan's picture

This already exists...  it's called the cash society...  and anytime I have encountered it through my profession, it's been a jaw dropping experience...  businesses in BFE making obscene amounts of cash that probably goes unreported...  hole in the wall places...  always interesting. 

Literally, there are people who for generations have worked for cash, are on no payroll, and need to purchase necessaries with cash...  likewise, there are businesses that operate largely on cash receipts from these people... 

The cash society grows directly proporionate to the taxing authority's increase in size, scope, and requirements.

downwiththebanks's picture

And when they do finally wake up, we KNOW that the most vocal ZeroHedgers will attack them for doing so.  

After all, popular protest against genocidal austerity and "liquidate everything!" politicians interferes with banker-gangsters getting paid.

Which means no hookers or dope.  Can't have that.

After all, keeping the bankers in good dope is Uncle Sam's #1 agenda item.

THE DORK OF CORK's picture

Max K had a excellent show about this back in December

Go to 13.50


The Profit Prophet's picture

I guess we will get to see if this corrupt farce of a financial system is truly a global circus. Do Europeans settle for 5 cents on the stolen dollar like they do in America?

T.E.I.N. everyone!

Hushups's picture

Yeah, but did you guys see Kate's dress!?!




snowball777's picture

Clinton got another one?

CPL's picture

What colour is it?


Spunk coloured.

tarsubil's picture

My wife literally got pissed off I didn't understand what "the Royal Wedding" was, I assume kate is the bride. I thought it was a movie or play. People are down right desperate for a distraction.

Reptil's picture

You can tell your wife they've intermarried for centuries. ^__^

Rainman's picture

It's just a bunch of female Cinderella bullshit. I am told over and over I will never be able to understand it....even if I wanted to.

Catullus's picture

Tell me again, Goldman, how you were "hedged" against AIG exposure.

DutchSucker's picture

Lets truly hope this isn't a cover-up by the EU to find those banks not guilty.


It is very easy to do a fake investigation and say nothing is wrong.

Any "official" leaks of irrefutable evidence are very welcome, and spread those far and wide please!

Dejean Splicer's picture

If it smells like Limburger it probably is Limburger. But credit for at least bringing it to light. Not too many others even bother any more. Too focused on their critical roles as inflators.

Captain Planet's picture

This investigation is a good step, but a little too late, no?

This investigation took 2 years to long will it take to file criminal charges?

And then prosecute? Dimon will be 120 by the time this goes before a judge.

Commander Cody's picture

A year from now they'll announce a multi-million Euro settlement with no admissions of guilt paid by the taxpayers.  This is SOP.

slackrabbit's picture

The best thing is that this whole charade is almost over.

Like TD said - we used to be the tin-foil or doomer brigade.

Notice how people aren't laughing anymore or the uncomfortable silences on CNBS?

Let alone people being accused of terrorism because they want fiscal common sence.

I think the loss of confidence is accelerating - and the latest poles show it, especially when people now longer tut-tut you when you refer to this as a depression or talk about the rank and blatent the manipulation in the  markets, instead they grimley agree.

This stuff is so transparent now, but the circle can not hold forever.

Gold and silver are doing the talking and even if people don't believe us, they do believe in profits - either way they vote with their feet for different reasons, but all in the same direction.

CPL's picture

The circle will last as long as people are educated by themselves and by the systems in place involve inner tubes and bananas

ivars's picture

See how nicely USA stimulating effects on DJIA pattern follows those of Greek government on Athens index in 2009. The USA seems to be very close to Greece in some financial behaviour aspects. Hence the future may also be the same:

IMA5U's picture

now that guys are falling all over themselves to buy credit, it is safe start poking to make sure the CDS guys don't construct something to blow up the world again

Urban Redneck's picture

they are already working on it - SDS

James's picture

Urban Redneck said -

they are already working on it - SDS



Don't you mean SDR?

Special Drawing Rights.

Urban Redneck's picture

Sovereign Debt Spreads

Technically CME calls them Sovereign Yield Spreads (SovYS), but that just disguises the function of being the next paper crap trend, and if they actually referred to them as SDS no one would buy them.

CDS - Private sector crap debt "protection"

SDS - Public sector crap debt "protection"

HEHEHE's picture

It wouldn't surprise me at all if the allegations are true - in fact I'd be surprised if they weren't.  The motivation though of the EU is of course questionable considering the bad shape of their banks and their members fiscal situations - lets stop the one market that gives a direct picture of what investors percieve to be our credit risk.