Scope of CDS anti-fraud rule raises concerns

Funds holding bond and swaps positions at risk under new SEC rule, warn lawyers


Investors trading credit default swaps (CDS) and their underlying cash instruments will have to tread carefully under a new anti-fraud rule issued by the US Securities and Exchange Commission (SEC), lawyers say.

The rule was intended to combat fraud and manipulation in security-based swap markets, which include CDSs, but has faced industry criticism since it was first proposed over a decade ago. It was re-introduced in December 2021, partly to tackle manufactured default scenarios, where funds

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