This page has been archived and commenting is disabled.

Markit Responds To Allegations Of CDS Pricing Collusion

Tyler Durden's picture




 

Earlier we observed the long-overdue (noted first here in March of 2009) allegations that Markit among any others may be involved in a massive CDS pricing collusion scheme. Now it is Markit's turn to provide its side of the story.

Markit Statement on European Commission CDS Inquiry

Markit is aware of the European Commission’s statement that it will open investigations relating to the Credit Default Swaps information and clearing markets.  Markit has no exclusive arrangements with any data provider and makes its data and related products widely available to global market participants.  Markit has created new and innovative products and services in a competitive marketplace since its inception, bringing greater transparency and information to the CDS market.  Markit is unaware of any collusion by other market participants as described by the Commission.  Markit does not believe it has engaged in any inappropriate conduct and looks forward to demonstrating that to the Commission.

Of course, this does sound much more diplomatically correct than this hypothetical example: "Markit is indeed owned by many of the 16 banks referenced in the charges, and confirms that it has in fact colluded with its owners to provide them with unfair pricing benefits and advantages." The latter version would surely be ludicrous.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 04/29/2011 - 15:47 | 1221867 hedgeless_horseman
hedgeless_horseman's picture

Markit will be owned by many of the 16 banks that make up a majority of the CDS market, and confirms that it intends to work with its owners to provide them with valuable pricing benefits and advantages while operating under the guise of improving liquidity and reducing risk.

Taken directly from the abstract of the Private Placement Memorandum?  Not too far off, I would guess.

Fri, 04/29/2011 - 15:50 | 1221908 Intellectual Chaos
Intellectual Chaos's picture

Reminds me of the congressional testimony given by the bankers at the mortgage hearings on capital hill, wondering if the same speach writers drafted this garbage.  They may need to have at least three lawyers sitting next to them the next time they release this recycled crap during the next crisis.

Fri, 04/29/2011 - 16:05 | 1221951 ebworthen
ebworthen's picture

Reminds me of those asswipes from GM and Chrysler flying in on their private jets to beg Congress for money and being surprise people were pissed.

Fri, 04/29/2011 - 19:42 | 1222643 sgt_doom
sgt_doom's picture

Are you actually suggesting, hedgeless_horseman, that when pricing firms, clearinghouses and the exchanges are all entirely owned by the bankster/oil cartel, it constitutes a global financial ultra-monopoly???

Why, that borders on some sort of conspiracy theory.........

Next you'll be suggesting that the only reason they established ELX Futures was to speculate on debt???

Fri, 04/29/2011 - 15:41 | 1221869 falak pema
falak pema's picture

markit is a tool kit to market a false insurance policy. Caught with their knickers down! ha ! the clowns...

Fri, 04/29/2011 - 15:43 | 1221874 Arius
Arius's picture

at first glance it seemed to me as "Market respond to CDS allegations"...and i thought what response ???

then i realized it was Markit not Mr. Market if such a thing still exist...

Fri, 04/29/2011 - 15:47 | 1221892 gwar5
gwar5's picture

We need more jails. We have enough criminals running around on the streets.

Fri, 04/29/2011 - 16:28 | 1222018 Piranhanoia
Piranhanoia's picture

The people living in the district of Columbia might consent to be jailers if a closet could be built to keep the empty suits in.  They would have to control all dry cleaning supplies going through the gate. No Martinizing.

Fri, 04/29/2011 - 19:15 | 1222556 Problem Is
Problem Is's picture

We could contract the Israelis to build a fence around all the political whore neighborhoods in DC like Gaza...

We'll call it the DC Strip and blast it with white phosphorus every now and again...

Fri, 04/29/2011 - 16:47 | 1222054 eatthebanksters
eatthebanksters's picture

just execute the fuckers and be done with it...they are scum bag life forms...clearing the world of their sociopathic gene pool would be a good thing.

Fri, 04/29/2011 - 17:29 | 1222205 Dr. Impossible
Dr. Impossible's picture

 

"We need more jails. We have enough criminals running around on the streets."

i haven't, in ten years understood why the police need squad cars. as its been well known most of the of criminals gather around the corners of 1st street and main st...in any town in the US.

Fri, 04/29/2011 - 15:49 | 1221900 Misean
Misean's picture

No we didn't! What proof do you have? Your proof is not entirely true! We already said mistakes were made...I can't beleive you guys are dredging up all this old stuff. Isn't it time to pull together and move forward?

Fri, 04/29/2011 - 15:50 | 1221904 hambone
hambone's picture

OT - Anybody capable of a quick summary of why secondard market T's yields falling while dollar falling?  Can't get my head round this one?  QE ending shortly and "someone" looking to buy T's and chase the yield down???

Fri, 04/29/2011 - 15:53 | 1221913 Misean
Misean's picture

Velocity of dollars increasing as people look for anything to buy in order to get rid of dollars.

Fri, 04/29/2011 - 15:58 | 1221924 Boston
Boston's picture

You asked this exact same question yesterday.

Ghost and I gave you several reasons.

Fri, 04/29/2011 - 15:50 | 1221905 johnnyblade
johnnyblade's picture

OT: aapl puking

Fri, 04/29/2011 - 15:55 | 1221912 hambone
hambone's picture

Like any party animal, it puked and then straight back to the party.

Fri, 04/29/2011 - 15:57 | 1221932 Drag Racer
Drag Racer's picture

Markit has created new and innovative products...

Markit is unaware of any collusion by other market participants...

Markit does not believe it has engaged in any inappropriate conduct...

 

3 standard lies these types always use.

Fri, 04/29/2011 - 16:05 | 1221947 betterlockaway
betterlockaway's picture

As someone once said," it is what it is."  Does anyone want to bet that nothing substantial happens?  Shall we round up the usual suspects?  The swaps market has been and most likely will always be UN-regulated.  There is no one watching the chicken coop.  The wolves roam freely.

 

And, Markit is owed by the dealers.  Markit pays the dealers a dividend for this investment.  There is no conflict of interest.  It is all one huge conflict of interest.  But, this is the way the business is structured.  Fu(ked up--yes. 

Fri, 04/29/2011 - 16:27 | 1222006 disabledvet
disabledvet's picture

so "back off, EU."  Blame game for imminent Greek "whatsamajigger"?

Fri, 04/29/2011 - 16:13 | 1221952 jm
jm's picture

CDS contracts are complex and illiquid.  This is why they are OTC.  Further, the bulk of CDS are bought and sold by dealers, and they aren't complaining.  They take the bid or not.  As for the sliver that is the rest of the market, they want it OTC because they need dealers for execution, unwinds and services.  An OTC market doesn't operate like exchanged-cleared stuff and it never will. 

Is it just a bunch of bureaucrats meddling, or are there actual complaints?  

I expect this is just a bunch of useless bureaucrats with an excuse to blame their failures and cronyism on the banks they bailed out. 

At best this simply serves to try and prod more OTC onto exchanges.  Wonder what EU Bourse is paying off whom in this scenario?  Yet more crony capitalism from the idiots on high... 

Fri, 04/29/2011 - 16:18 | 1221987 Tyler Durden
Tyler Durden's picture

Pretty much all equity derivatives are complex. They are however not illiquid because most of them are on exchanges. Why should CDS not trade on exchanges?

Fri, 04/29/2011 - 16:29 | 1222011 jm
jm's picture

Because the triggering events in a CDS aren't amenable to standardization.  For example, some hedgers want protection against restructuring, some want protection against default. I suspect some of them use CDS to solidify their position in debt rescheduling events. 

Because the up-front that adjusts for different spreads to standardize them for an exchange makes them even more a pain in the ass and users would rather they just be OTC.

If there was market discipline and no bailouts, none of those corruptible incompentent regulators would give a damn about CDS because they would take care of themselves.

Fri, 04/29/2011 - 16:53 | 1222065 disabledvet
disabledvet's picture

how does a regulator "give a dam" (sp?) about gold?

Fri, 04/29/2011 - 17:01 | 1222098 oogs66
oogs66's picture

That is not true.  At this stage virtually all CDS trades with the SNAC protocol.  So they are standardized.  In addition to that, there is now a Credit Event Determination Committee (or some similar body) made up of dealers and some select clients that determines if a credit event has occurred.  There is no reason CDS could not trade on the exchanges.  The CDX indices could be as liquid as e-minis, and the single names would resemble LEAPS - liquid but not traded that much except for a few contracts.

Fri, 04/29/2011 - 17:28 | 1222207 jm
jm's picture

SNAC protocol, yes.  But determinations of a default/restructuring/blah event is a separate issue.  

And you can get a spread quote for the upfront that sux.

Talking about LEAPS aren't winning me over to your side ;)

Fri, 04/29/2011 - 21:18 | 1222901 oogs66
oogs66's picture

SNAC eliminates any confusion of translating spread to up front for a SNAC contract.  it is deterministic.

 

Same for credit events.  For SNAC contracts it is agreed by the committee whether a credit event has occurred or not

 

And yeah Leaps aren't great, but reality is 5 year DOW would have some trades, 3.5 year, would be very illiquid.  On the run IG16 would be ultra liquid.

Work needs to be done to make a large % of the product exchange tradeable, but SNAC eliminates a lot of your concerns - which remain legitimate for old trades, but far less so for SNAC trades.

Index would be a great first start, but the roll is still one of the biggest hurdles even there.

Clearing should have been implemented long time ago :)

Sat, 04/30/2011 - 07:00 | 1223530 jm
jm's picture

To me the moral of the story is that the devil, I mean the dealer, always gets his due.  Or there is no market.  Political interference and "investigation" signals something slimy going on.

I agree with you that there are CDS indices that are liquid enough for exchange-trading. If there is a market for them, I won't quibble.

But those indices trade on OTC very tight wrt bid-mid-ask (if you check with more than one dealer) so what is the benefit of exchange-trading them?

A couple of years will make that roll issue smell like another VXX story.

 

Fri, 04/29/2011 - 16:56 | 1222016 disabledvet
disabledvet's picture

is this a question TD?  there's a saying in quality journalism:  "the best questions already have an answer."

Fri, 04/29/2011 - 16:35 | 1222027 falak pema
falak pema's picture

Provided both sides of the deal understand what the product is and all its implications. For CDS covering CDOs we have a classic example of semi-blind leading the blind, hood winked by those who knew what those toxic cookies really contained, that were pedaled on the market by proxies and PDs alike. Circles within circles as the cookie got passed around world wide. What good is a CDS for a CDO that no one really understands. The financial market is now Frankenstein's child and likes playing spooky games...like politicians like being the puppets of their global images created by 'spin doctors'...At the end you ask yourself who is the true 'it' and who is the pale shadow...wonderful Madison avenue and the reign of Mad men...alike their Quant spin doctors of finance...

Fri, 04/29/2011 - 16:56 | 1222066 sharkbait
sharkbait's picture

Hear Hear!

They should be traded on exchanges.  Contafgion risk would go down dramatically if they were.

however the TBTF players involved in these products loathe the idea of the greater transparency that would come about from exchange trading.

The 'justification' they would use is exchange trading would force to much standardization which would inhibit the usefulness of the products and stifle innovation.

If we have learned anything over the past decade it is that a liitle less innovation in financial product black magic would be a good thing.

Fri, 04/29/2011 - 17:07 | 1222108 jm
jm's picture

I'm all for exchange trading when it makes sense.  For the reasons I brought up, not sure it makes sense for CDS.  For example, if you standardize something too much, they may not serve your purpose and you don't buy them.  If you provide too much transparency, margin compression can create risk because dealers may increase volume and concentrate risk even more.    

I'm all for a clearinghouse.  They work for stability. 

Fri, 04/29/2011 - 17:12 | 1222134 oogs66
oogs66's picture

too late on a friday for such a long discussion about an interesting and complex subject :)

Fri, 04/29/2011 - 17:37 | 1222237 Robslob
Robslob's picture

Enron was complex and we all know how that ended.

Thanks Tyler...you are a hero for mankind IMHO...at least for those smart enough to read this blog!

I continue to spread the word.

Fri, 04/29/2011 - 16:21 | 1221991 Cdad
Cdad's picture

OT...sort of.

Take a look at the criminal syndicate Wall Street banker handiwork in this manipulated market on OXY.  

The plan:

Load up on calls, hire GETCO, wait for the "sell the news" crowd, upgrade the stock, gap the stock up in the morning, buy the shares up 9% to all time highs, liquidate calls at a 250% gain, buy a half million more shares at the close, flash crash the stock one minute after the close to below the low of the day to bottom out the technicals [DeMarks] to infinity to replicate selling exhaustion...on 400 shares.  Presto.  

Keep in mind, this is a $93 billion dollar market cap stock moving 9% in one session.  Or I guess it WAS a $93 billion market cap. 

The takeaway...apparently the criminal syndicate does not care if Average Joe never comes back to the market.  Brilliant.  

It will be fascinating to watch this stock on Monday.

Good grief [and by that I mean anyone who really thinks this is a market would have to be a huge fan of Dancin' with the Stars]

Fri, 04/29/2011 - 16:27 | 1222003 ivana
ivana's picture

I am watching this giant global financial fraud consisting of: MARKIT, ratings, CDSs, MBSs, OTCs, loans, credits, yields, GS, JPM, Citis, AIGs, CBs, FEDs, MSM, Krugmans, Liesmans, CNBC, EU ECBs etc etc etc etc etc etc YOU NAME IT - IT'S MANIPULATED. I call them banksters.

There are hundreds of "players".
But what really makes me wonder, how they all work so perfectly sychronized together - AS ONE and manage to push exp. Greece in default?

Ok maybe Greece is not good example since gov is fully corrupt....

How they managed to slowly slowly trough several years of synchro efforts push Portugal to the brink of collapse?
Who is project manager for Portugal case? Single point of contact in great scheme? Who invented PIIGS words years ago before anyone knew what is CDS?

Fri, 04/29/2011 - 19:47 | 1222658 sgt_doom
sgt_doom's picture

"But what really makes me wonder, how they all work so perfectly sychronized together - AS ONE and manage to push exp. Greece in default?"

Quite simple, per my previous comment, they own all the exchanges, clearinghouses and pricing firms.

They also own the US Treasury -- just look at the background of all the managers there, and the committee members.

They control the issuing of the debt, then the controlled speculation on said debt (both at the sovereign level -- CDSes on sovereign bonds, etc., at on variety of levels).

And Greece is a perfect example (along with Latvia, Iceland, Portugal, Ireland, etc.), because they structured all those public-private partnerships, underwritten with securitized debt, so they fully understood the details involved, and they were tracking every moment.

They, of course, are the bankster/oil cartel.

Fri, 04/29/2011 - 16:35 | 1222028 betterlockaway
betterlockaway's picture

CDS does not trade on an exchange because the dealer community does not want it that way.  If they could, they would make so that no one but the dealer banks and the accounts know trade levels.  The CDS dealer community is a small club that only the biggest and most capitalized banks can join.  Too many players would take out the spread.  Who wants that? 

Fri, 04/29/2011 - 17:15 | 1222042 michigan independant
michigan independant's picture

Because they are private executions for the select elect and not consumer driven products. Lies, damn lies and market executions. We do not want Testamony on the Hill just results. Habeas corpus, but no Business wants to be regulated to death or marred in public opinion. Financed bear raids kinda suck unless your in on it.

Latin for "that you have the body." A writ of habeas corpus is used to bring a prisoner or other detainee (e.g. institutionalized mental patient) before the court.

GeoCorps are flush with cash for bolt on's induced events since Mr. Market are events. Club Fed basically. The last will and testament of rent dissipated issues for the herds behalf.

http://www.youtube.com/watch?v=41d-vFc76mY&feature=related

Innovation is tolerated by Governments only. Master builder dilema really to aggregate issues

Fri, 04/29/2011 - 19:55 | 1222670 Gold 36000
Gold 36000's picture

you need to get back on your medications before it is too late.  You should have listened to your doctor.

Fri, 04/29/2011 - 21:48 | 1222951 michigan independant
michigan independant's picture

easy or the viatical posse will single you out, never mind have a night cap and relax and have some fun for a change

Fri, 04/29/2011 - 16:43 | 1222052 eureka
eureka's picture

When will U.S. bank stocks crash/adjust 20% down, thus reflecting their declining earnings - and their real negative asset holdings - which they, upon end of QE2, will be stuck with?

Predictions - including time frames & drop rates, anyone?

Fri, 04/29/2011 - 18:09 | 1222363 AldousHuxley
AldousHuxley's picture

Markit is the ugly stepchild company that is allowing bigbanks to outsource risky business off of balance sheet and legal liability.

UK beat US (Citadel, CME) on this latest greatest financial scam.

Fri, 04/29/2011 - 18:16 | 1222378 trx
trx's picture

Just to fill in some blanks; SIX group, based in Switerland (of course), owned by SIX major global banks, now have their own eletronic exchange, their own financial news agency (SIX News)and their very own OTC market to play with.... Ain't that nice?

 

 

Press release:

 

Markit to provide OTC trade reporting for SIX Swiss Exchange

 

SIX Swiss Exchange and Markit announced they have signed an agreement which recognises Markit as the first Approved Trade Data Monitor (TDM) for SIX Swiss Exchange. The Agreement enables foreign participants of SIX Swiss Exchange, known as "Remote Members", to report their off-exchange (OTC) trades in Swiss securities admitted for trading on a Swiss stock exchange via Markit BOAT, from 18 April 2011. This service provides flexibility for SIX Swiss Exchange’s Remote Members to fulfill their reporting obligations in Swiss securities either via the Exchange or via Markit. Remote members of SIX Swiss Exchange previously had to report their OTC trades in Swiss securities admitted for trading on a Swiss stock exchange to the reporting office of SIX Swiss Exchange. This new development will provide flexibility of reporting venue and enable SIX Swiss Exchange's Remote Members to choose the platform for their trade reporting needs. Sophia Kandylaki, Director and Head of Markit BOAT at Markit, said: “SIX Swiss Exchange is one of the world’s most technologically advanced exchanges and we are delighted to welcome their Remote Members on to the Markit BOAT platform. This will enrich Markit’s dataset considerably and consolidate our position as the leading trade reporting venue for the OTC equity markets.” Markit BOAT provides a comprehensive view of the European OTC equity markets. The service gives users access to trade reports on an average of EUR 375 billion of OTC trades in equities every day. This is equivalent to approximately 70% of the daily volumes traded on all European equity markets.

Fri, 04/29/2011 - 23:22 | 1223134 sgorem
sgorem's picture

WOW! Am I in the wrong fucking place. jeeeesh guys, can we talk in a little more understandable lingo? Shit, it takes me three tries to get logged on here. The third try is always an easy one, but I still use my calculator, no shit..........

Sat, 04/30/2011 - 05:23 | 1223500 Coldfire
Coldfire's picture

Mark it zero.

Sat, 04/30/2011 - 10:03 | 1223745 snowball777
snowball777's picture

Nobody fucks with the Jesus.

Sat, 04/30/2011 - 09:28 | 1223681 MrBoompi
MrBoompi's picture

"Markit has no exclusive arrangements with any data provider..."
---

Lawyerspeak for "Markit has exclusive arrangements with EVERY data provider who is an owner of Markit"

I'm sure this service lowers risk, for THEM. It raises the risk for everyone else involved.

These are just not-so-sophisticated scams. Just make them pay the bribes to the appropriate authorities now and get it over with.

Sat, 04/30/2011 - 10:02 | 1223743 snowball777
snowball777's picture

But for you, my European friend, I can make such a deal...

Sat, 04/30/2011 - 11:07 | 1223913 indio007
indio007's picture

just wait till China starts settling their dollar holding's in US real property.

 

I'm just wondering why a law was passed in 1999 that seems to have been anticipitory of the FED "buying" MBS's.

It led the FED monetize mortgages directly into dollar printing. 

Anyone know if any other country has used real property as a backing for their currency?

Do NOT follow this link or you will be banned from the site!