N.Y. AG Probes Brokers On CDS

New York Attorney General Andrew Cuomo has subpoenaed eight interdealer brokers to produce data and other communication regarding their activities in credit default swap trading. People familiar with the situation say Cuomo, as well as the Securities and Exchange Commission in a separate inquiry, are looking to identify dealers who during August and September may have spread false information to manipulate CDS prices. Two of the exchanges uncovered were emails between Marcos Brodsky, a partner at Phoenix Partners, and Roman Shukhman, a credit derivatives trader at JPMorgan. According to documents, the first email from Brodsky suggested Goldman Sachs was looking to sell a CDS index position, while the second one, from Shukhman asked about seeking notification for when a Deutsche Bank had entered the market.

“Because there was no supervision of the Credit Default Swap market, you could have done a hundred-million-dollar CDS deal with a hedge fund in Antigua if you so chose. Heck, you could have put on a seven figure trade with your Uncle Fred. Or the hairdresser down the street. Or your neighbor’s cat.”
You can’t do a trade by yourself. You need to find someone else to take the other side of the trade. Only an idiot would take a trade with your neighbor’s cat. By the way, would your author like to trade with my neighbor’s cat?

“You don’t have a prayer of sorting out who traded what or with whom… not without a few months of digging and sorting anyway. You don’t know how many of your trading counterparties are out of business, let alone solvent. As if that weren’t enough, you don’t even know if your own trading department is on the hook for tens of billions… or whether tens of billions are still owed to you!” Does your author care to provide any support for his claims? Questions for you… if the biggest default in the history of the United States (Lehman Brothers) resulted in $5.2 billion lost (and gained) in the entire CDS market (www.dtcc.com)… why would you think a single firm has tens of billions owed to them and doesn’t realize it? Why do you think with over 90% of CDS electronically settled (Fed website) there are months of paper to sort through? Life must be great for Justice Litle when you are not restrained by facts.