Brussels: The banking industry argued at a meeting with European Union regulators that trading in sovereign credit-default swaps isn't large enough to affect Greek bond prices.
Swaps account for "only a small percentage of government bond trading volumes", so it isn't likely speculation in the contracts is "dictating price levels in the larger government bond market", the International Swaps and Derivatives Association, an industry group, said in a statement. The group said the Brussels meeting offered a chance to address "misconceptions" about credit swaps.
Banks and regulators across Europe were summoned by the European Commission to an informal meeting to discuss regulation of the market for sovereign credit-default swaps in the wake of the Greek debt crisis. European leaders have said the products fuel speculation that can distort market perceptions, making it harder for countries to borrow.
The commission, the EU executive agency, should ban naked swaps speculation, where investors insure bonds they don't own, because "it is a demonstrably dangerous market", Richard Portes, founder of the Centre for Economic Policy Research, said in a telephone interview. "If I were the commission, I'd ask the banks to say what social function the trade in naked CDS has."
The roundtable was a "technical meeting", and the discussions will be taken into account for the commission's planned derivatives proposals later this year, Chantal Hughes, a commission spokeswoman, told reporters.
