MNI BRIEF: Swiss CDS Spike Shows Need For More Clarity - ESMA

Europe should be “more ambitious” in its attempts to make credit default swaps and over the counter derivatives markets more transparent, the head of the European Securities and Markets Authority said in an interview Wednesday, with the current opaque regime standing in “stark contrast” to that of the US.

Trade transparency requirements for OTC derivatives, including CDSs, were introduced in 2014 via the EU’s Markets in Financial Instruments Regulation (MiFIR), “but actual transparency regarding trading activity remains very limited,” Verena Ross said.

Events in March, when the cost of insuring against bank defaults surged to record levels amid the Credit Suisse crisis, confirmed that the market for single-name CDSs has limited trading activity and low liquidity, she said, with potential financial stability risks arising from large movements. “These markets are global in nature, so we should be pushing to improve transparency and reduce data gaps in Europe,” Ross said.