New worry about the CDS market: Insider trading

We've gotten used to illegal insider trading cases related to stocks. The SEC may have potentially opened up a whole new frontier when it brought its first insider trading cases alleging the passing of confidential information that led to a big gain in the credit default swaps market. The SEC charges, detailed in The Guardian, accuse Deutsche Bank bond salesman Jon-Paul Rorech of giving detailed information about a VNU bond issue to Renato Negrin, a portfolio manager at Millennium Partners. The hedge fund CDSs on the VNU bonds and after the restructuring was announced realized an immediate profit of $1.2 million.

This is great, but wow, talk about a whole new area to be mindful of. The SEC and other regulatory bodies have invested hundreds of millions in technology to aid in their quest to root out insider stock trading. But you'd have to think that the apparatus on the CDS is non-existent. Hats off to the SEC for wading into an area in which it is not set up to succeed. You have to wonder: Is the CDS market a hotbed of insider trading? We'd never know, frankly.

For more:
- here's the article from The Guardian

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