SEC's Cox Says Regulation Needed for Credit Default Swaps

Christopher Cox, chief of the Securities and Exchange Commission, testified to Congress on Tuesday that new regulation is required for credit default swaps (CDS), which have a notional value of $58 trillion, a figure far exceeding the total value of the U.S. stock market.

He said the CDS market - an instrument designed to transfer the credit exposure of fixed income products between parties - is currently "regulated by no one" and is "ripe for fraud and manipulation," Cox said. He urged Congress to use their authority to create regulation "to ensure the operation of fair and orderly markets."

Cox also said the SEC has "devoted an extraordinary level of enforcement resources to hold accountable those whose violations of the law have contributed to the subprime crisis and the loss of confidence in our markets." He said there are over 50 pending law enforcement investigations in the subprime area.

By Patrick McGee and edited by Nancy Girgis
©CEP News Ltd. 2008