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The Zacks Analyst Blog Highlights: Bank of America, JPMorgan Chase, Goldman Sachs Group, CME Group and IntercontinentalExchange

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For Immediate Release

Chicago, IL – July 3, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Bank of America Corporation (BAC - Analyst Report)-Free Report), JPMorgan Chase & Co. (JPM - Analyst Report)-Free Report), Goldman Sachs Group, Inc. (GS - Analyst Report)-Free Report), CME Group Inc. (CME - Analyst Report)-FreeReport) and IntercontinentalExchange, Inc. (ICE - Analyst Report)-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday’s Analyst Blog:

EU Slaps CDS Collusion Charge on Banks

Investment banks’ hold over the derivatives market has come under regulatory scrutiny as European Commission – the European Union’s (EU) anti-trust body – accused 13 large global banks of colluding against stock exchanges. The EU charged the banks for preventing the exchanges from entering the lucrative derivatives market during 2006–2009.

Some of the banks indicted by the EU include – Bank of America Corporation (BAC - Analyst Report)-Free Report) and JPMorgan Chase & Co. (JPM - Analyst Report)-Free Report) along with the Bear Stearns Co. business that it purchased, BNP Paribas SA and The Goldman Sachs Group, Inc. (GS - Analyst Report)-Free Report). Concurrently, International Swaps and Derivatives Association (ISDA) and Markit – a financial data provider – was also charged by the EU.

After conducting preliminary investigation, the EU concluded that banks, aided by ISDA and Markit, prevented Deutsche Boerse Group and CME Group Inc.’s (CME - Analyst Report)-Free Report) Chicago Mercantile Exchange from entering the credit default swaps (CDS) business during 2006–2009. Nevertheless, IntercontinentalExchange, Inc. (ICE - Analyst Report)-Free Report) has started offering credit futures on its exchange from this year.

CDS permits an investor to place a bet on whether a company or country will default on its bonds within a fixed time period. CDS were initially traded over-the-counter (OTC). Gradually, given the regulatory efforts to improve transparency, CDS have been shifting to exchanges.

The EU alleged that the banks were against the CDS move from OTC to the exchanges, as their bottom lines would have suffered, since exchange-traded CDS are less expensive. Hence, the banks instructed ISDA and Markit to refuse the stock exchanges licenses to use their data for creating exchange traded CDS. They were only given licenses to using data for OTC products.

Further, OTC trading of CDS lacked transparency and regulatory oversight, thereby weakening the financial markets. This was all the more exposed when Lehman Brothers Inc. collapsed in 2008. Since then, efforts from regulators across the globe continue in an attempt make derivatives trading more transparent.

The banks charged by the EU for their alleged involvement in such contentious practices are expected to be severely penalized. Moreover, the U.S. anti-trust authorities have started their own investigation with respect to similar allegations.

For banks, these charges and investigations pose huge risks. These are likely to increase legal expenses and tarnish the company’s reputation to some extent as well.

However, for financial markets as a whole, these initiatives will help in countering economic crisis in the future. Notably, this could ultimately result in less involvement of taxpayers’ money in the bailout of troubled financial institutions.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
 

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