Sign up to The Irish Times Archive (1859 - 2008)My Account »

European Union regulators have opened two antitrust investigations into the market for credit default swaps (CDS), financial instruments used for hedging and market speculation.

The European Commission, which acts as competition regulator for the 27-member EU, said it would investigate whether 16 investment banks and CDS market information provider Markit had colluded or abused a dominant market position.

At the same time, the Commission said it had opened proceedings against nine of the 16 banks and ICE Clear Europe, a CDS clearing house, to examine whether preferential tariffs granted by ICE to the banks had damaged competitors.

"CDSs play a useful role for financial markets and for the economy," the commissioner in charge of antitrust cases, Joaquin Almunia, said in a statement announcing the investigations.

"Recent developments have shown, however, that the trading of this asset class suffers a number of inefficiencies that cannot be solved through regulation alone."

The 16 banks being examined are: JP Morgan, Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Commerzbank, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, HSBC, Morgan Stanley, Royal Bank of Scotland, UBS, Wells Fargo, Bank/Wachovia, Credit Agricole and Société Génerale.