Credit market front-running needs tackling, says Broadman

Front-running in the credit derivatives markets needs to be tackled, said Bart Broadman, founder and head of Singapore-based hedge fund Alphadyne Asset Management. Speaking at the second annual Asia Risk conference in Hong Kong on Monday November 20, he said there may be “no Eliot Spitzer for the credit markets, no overarching regulator; but front-running or potential insider trading is going to get a lot of scrutiny”.

Front-running is the practice of taking a position in the market with advance knowledge of an imminent transaction that is likely to influence the market price.

Broadman added that the credit market in Asia would benefit from credit futures contracts. Citing the illiquidity of Asia’s credit markets, he said: “Something needs to happen with the help of an exchange, such as listed credit default swaps [CDSs] with simple binary-type payoffs. That would create a big risk pool and more transparency,”