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Cox urges credit default swap regs

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By Sara Hansard

October 8, 2008 5:48 pm ET

Securities and Exchange Commission chairman Christopher Cox today repeated his request for immediate congressional action giving the SEC authority to regulate the $58 trillion credit default swaps market.

“The regulatory black hole for credit default swaps is one of the most significant issues we are confronting in the current credit crisis, and it requires immediate legislative action,” he said at a round table on modernizing the SEC’s disclosure system.

The size of the unregulated credit default swaps market, which is barely 10 years old, is more than the gross domestic product of every country on earth combined, Mr. Cox said.

The SEC is creating a database of trading information for hedge funds, which are now required to report short sale trades to the commission. The SEC is also creating a database of credit default swaps clearing data, he said."

“The reason for this aggressive enforcement investigation into credit default swaps is the significant opportunity that exists for manipulation in the $58 trillion credit default swaps market,” Mr. Cox said.

In other news, Mr. Cox reported that the SEC has more than 50 pending enforcement investigations regarding the subprime-mortgage crisis.

“The agency has been especially aggressive at combating fraud that has contributed to the subprime crisis and the loss of confidence in our markets,” he said.

Earlier this week, the SEC charged five California brokers with securities fraud for pushing homeowners into risky and unsustainable subprime mortgages and then fraudulently selling them securities that were paid for with the mortgage proceeds, Mr. Cox noted.

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