Markit and ISDA’s EU Settlement Ends Antitrust Probe on CDS

  • Markit and ISDA pledge to license CDS inputs for 10 years
  • EU commitments end threat of fines, shut lengthy CDS probe

IHS Markit Ltd. and the International Swaps & Derivatives Association finalized a settlement with European Union regulators, ending a lengthy antitrust probe into credit-default swaps that previously targeted global investment banks.

The European Commission accepted pledges by IHS Markit and ISDA on licensing intellectual property on fair terms. Regulators had been concerned over possible restrictions on licensing ISDA’s so-called "final price," which is used to determine payments following a default, and IHS Markit’s iTraxx and CDX indexes.

Today’s settlement shuts down the last strand of a once high-profile probe into banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. that the commission suspected had conspired to stop exchanges from competing in the CDS market. The banks were dropped from the probe last year after the commission said it lacked evidence of wrongdoing. Regulators continued to investigate ISDA and IHS Markit, adding them to the case in 2013.

The commitments, which will last for 10 years, "will translate into more choice and lower transaction costs for investors and will also increase market stability," EU Competition Commissioner Margrethe Vestager said in an e-mailed statement.

Both IHS Markit and ISDA will exclude CDS dealers from taking or influencing individual licensing decisions. ISDA pledges to license rights in the Final Price for exchange trading on fair terms and IHS Markit will license rights in the iTraxx and CDX indexes on fair terms for exchange-traded financial products based on the indexes it owns.

“ISDA remains committed to further developing CDS market structure to ensure the market functions safely and efficiently,” the organization said in an e-mailed statement.

“We are pleased to have reached agreement with the European Commission to resolve this matter,” IHS Markit said in an e-mailed statement. “We have agreed a set of commitments without any finding or admission of wrongdoing, or the payment of any monetary penalties.”

Even so, IHS Markit and ISDA can be fined by the commission should they breach the terms of the settlement. Their compliance will be monitored by independent trustees and subject to third-party arbitration in case of any dispute.

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