The antitrust division sent civil investigative notices this month to banks that own London-based Markit to determine if they have unfair access to price information, according to three people familiar with the matter. US lawmakers plan to regulate the US$592 trillion over-the-counter derivatives market, which includes credit-default swaps blamed for helping worsen the biggest financial calamity since the Great Depression.

Justice Department spokesmen couldn’t immediately be reached for comment. Markit Chief Executive Officer Lance Uggla didn’t immediately respond to a voicemail left on his mobile phone.

Credit-default swaps – contracts that protect against or speculate on corporate defaults by paying the buyer the face value of a bond or loan if a company fails to meet its debt agreements – ballooned almost 100- fold within seven years to represent about $62 trillion by the end of 2007, according to estimates from the New York-based International Swaps & Derivatives Association.

Unregulated market

Unregulated trading of the contracts made it difficult for the US to assess how connected banks had become following the failure of Lehman Brothers Holdings Inc. in September. Credit markets froze when the New York-based firm, once the fourth-largest US investment bank, collapsed in the world’s biggest bankruptcy.

The Obama administration now wants all trades of over-the- counter derivatives to be backed by clearinghouses or registered with regulators. Derivatives are contracts whose value is derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in interest rates or the weather.

Increased scrutiny

“This has to be seen as another step towards regulating the over-the-counter market,” Philip Gisdakis, head of credit strategy at UniCredit SpA in Munich, wrote in a research report published Tuesday.

Markit provides derivative and bond data to more than 1,500 customers. It owns the most actively traded credit swap indexes and pricing services in the market, which represents $28 trillion in underlying securities, according to the New York-based Depository Trust & Clearing Corp.

JPMorgan Chase & Co. is Markit’s largest shareholder, with at least 1.67 million ordinary voting shares out of a total of 14.38 million, according to filings at UK Companies House. Bank of America Corp. is the second-largest, with more than 1.52 million shares held through its own units and those acquired in its purchase of Merrill Lynch & Co. last year. Royal Bank of Scotland Group Plc owns at least 1.35 million shares after its purchase of ABN Amro Holdings NV, while Goldman Sachs Group Inc. has about 1.11 million shares, the filings show.

Source: Bloomberg