Sarkozy, Merkel lead proposal for greater regulation of credit default swaps

Sarkozy, Merkel propose ban on some CDS trades

PARIS — French President Nicolas Sarkozy and German Chancellor Angela Merkel are leading a proposal that calls for mandatory reporting of all derivatives trading in Europe as a way of clamping down on the type of speculation that has undermined the euro in recent weeks as a result of the Greek debt crisis.

Sarkozy, Merkel and the leaders of Luxembourg and Greece have sent a letter to European Commission President Jose Manuel Barroso asking him to launch an inquiry into the role of credit default swaps in the trading of government bonds in European countries.

The letter, which Sarkozy’s office released Thursday, also says the EU should consider banning speculative trading in credit default swaps and consider legislation to curb market abuses, and improve the safety of private derivative trading.