European Union antitrust regulators will focus on possible collusion between Markit Group Ltd. and 16 investment banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. after suspending a parallel probe into clearing deals between nine of the lenders and ICE Clear Europe.
The European Commission will prioritize the investigation into whether the 16 banks shared some pricing and other essential daily data only with Markit, a data provider majority-owned by Wall Street’s largest banks, said an official, who asked not to be named because the EU’s decision isn’t public.
The EU will suspend a separate investigation into Intercontinental Exchange Inc.’s U.K. unit and banks for lack of evidence, the official said. The antitrust agency won’t formally close its investigation and will continue to monitor possible infractions. The probe examined ICE’s preferential fees and profit-sharing arrangements with Goldman Sachs, JPMorgan, Bank of America Corp., Barclays Plc, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Morgan Stanley and UBS AG.
The investigation into banks’ agreements with Markit also involves BNP Paribas SA, Commerzbank AG, HSBC Holdings Plc, Royal Bank of Scotland Group Plc, Wells Fargo & Co., Credit Agricole SA and Societe Generale SA, the commission said last year.
While the EU’s conclusions from the two investigations won’t confirm all of its suspicions, they will show “other elements of the bad functioning of this market,” EU Competition Commissioner Joaquin Almunia said in a speech at a European Parliament committee earlier this week.
Global regulators have sought to toughen regulation of the credit-default swap market, saying the trades helped fuel the financial crisis. The EU’s swaps probes add to separate investigations into whether banks colluded to manipulate the London interbank offered rate. The U.S. Justice Department is also probing the credit derivatives clearing, trading and information services industries.
Alex Paidas, a spokesman for Markit in New York, declined to comment immediately. Claire Miller, a spokeswoman for ICE Clear Europe in London, declined to comment.
CDS are derivatives that pay the buyer face value if a borrower defaults. Clearinghouses operate as central counterparties for every buy and sell order executed by their members, who post margin and contribute to default funds, reducing the possible risks that a derivatives trade may collapse.
Dealers of credit-default swaps in Europe bowed to pressure from the EU in 2009 to conduct trades through clearinghouses, such as ICE Clear, to cut risk to the financial system.
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