By Huw Jones and Krista Hughes
LONDON/BASEL, Switzerland, March 8 (Reuters) – European Union finance ministers will discuss next week how to dampen speculation on sovereign credit default swap markets, sources said, as central bankers worry some selling practices pose wider risks.
Greek debt has come under pressure as the country seeks to tackle a ballooning deficit and some politicians say speculators using CDSs, intended to insure against any risk of debt defaults, are amplifying the country’s problems.
“The European Commission may bring forward an initiative at the 16 March Ecofin,” an EU diplomat said.
A senior trading official expects the Commission to say it is studying CDS trading rather than bringing in an immediate ban on “naked” selling of CDS, where the buyer of a contract does not own any of the underlying asset it insures.
Financial Stability Board Chairman, Mario Draghi, said greater regulation would be the natural outcome.