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By Jeremy Grant in Brussels
Published: December 2 2009 01:02 | Last updated: December 2 2009 01:02
Europe's largest companies have accused the US of being "adamantly unwilling" to relax proposed reforms of the over-the-counter derivatives markets, exposing the first transatlantic split over how far to clamp down on the opaque markets.
The comments, made by the European Association of Corporate Treasurers (EACT), raise the possibility that Europe and the US may go their own ways in implementing reform of the OTC derivatives market even as US and European policymakers have pledged to collaborate on the outcome.
Companies in the US and Europe have been lobbying against regulators' demands that as many OTC derivatives as possible be shifted onto exchanges and processed through clearing houses.
Europe and US split on derivatives reform
Article Source: FT.com- Enjoy this article? Help vote it up the 'Vine.
- Public Discussion (8)
The Senate Agriculture Nutrition and Forestry Committee held a hearing Dec. 2 (webcast not yet archived), and the Joint Economic Committee held a hearing titled “Unregulated Markets: How Regulatory Reform Will Shine A Light in the Financial Sector,” Dec. 2, chaired by Rep. Maloney (NY-D) can be viewed here. The sound quality isn't the best into the first several minutes of Brooksley Born's testimony... but still well worth listening to.
According to Rep. Maloney financial regulatory reform is slated for a vote in the house sometime next week...or two...or three...or four...who knows.
"Everybody talks about [reform], but nobody does anything about it."
- 2 votes
#1 - Sat Dec 5, 2009 11:46 AM ESTLets not forget that the credit derivatives caused the meltdown, are a fundamental part of the banking profit mechanism, and make up 80% of the derivatives market. Now we know that our "representatives" are about 0 for 1000 in picking the rights and interests of their constitutents over the banks, so who actually expects any real reform here?
- 2 votes
As Gensler simplifies it [OTC derivatives trades], for every $50 tank of gas there's approximately $1000 in derivatives behind that tank of gas.
So...you don't believe central clearing or even a central repository of derivatives trades will ever occur? I want to hold out hope that two goals set forth by Gensler at the very least will be achieved: "promoting transparency of the markets and lowering risk to the American public."
- 1 vote
I think derivatives should be regualated. I thnik they are useful in managing risk. The only real question is why they haven't been. I don't think it is the commodity part that is the culprit, I think it was the inclusion of the credit derivatives that meant that we won't see regulation.
Right now credit, banking in the area of money creation is virtually unregulated even now - so why would they allow regulation over derivatives? This is after 3 major recessions in less than 20 years all caused by them!
- 2 votes
Look. We're never going to be able to eliminate the presence of disequilibrium in boom-bust cycles and the nature of human reflexivity of markets. It's just the way it is.
That said, the push in current reform negotiations is for a central clearing exchange, and at the very least a central trade repository for these special types of futures contracts.
Just about everyone who has testified before the Senate agrees transparency will go a long way in keeping the banks, and rogue traders, in line. Position limits, central clearing and a list of other safety valves would help as well.
The opaqueness and sheer size of the market, along with the lack of any regulation in the OTC markets, in addition to inadequate funding for CFTC regulators, contributed to our current economic, as well.
Legislators are finally paying this dilemma lip service, decades late and trillion$ of dollars short. It's just another day in paradise. /sarcasm
- 1 vote
The problem with Derivatives is that they are really nothing more than a bet. The monetization of them is a bit of a joke frankly ......
The solution to managng the business cycle is to fix the monetary system. We are slaves to our money system which issues money as debt, transferring wealth from the productive economy to the financial (unproductive) economy. All these shenanigans of setting rates, valuing collateral, insuring are all inherently just busy work - productivity is driven by actually producing something people can consume. The manipulations of these variable causes the business cycles. If we just concentrated on producing whjat people needed, matching supply and demand there would not be a business cycle other than that caused by non economic factors .....
I definitely want to see this regulated. I also want all hedge funds to be required to report their holdings monthly. But, there's a lot of money behind the secrecy. We'll se what we get. Anything is better than nothing and a starting point to press for full disclosure.
- 1 vote
#2 - Mon Dec 7, 2009 11:36 AM ESTGood Luck. This stuff dates back to at least 1800 when guys like the Rothschild family used dummy corporations and paid "men" to hold their fortunes and manipulate markets behind the scenes ..... to Prescoott Bush who acted as an agent fraudulently representing himself and others as owners of assets held by Nazi sympathizers in the Union Bancorp. Hedge funds are the modern incarnation of this behavior designed to manipulate markets and hide the true wealth.
Do you really think Gates is the richest man in the world cause Forbes says so? The 4th largest holdings of US treasuries is by "Caribbean" private holding companies. This is direct control, using derivatives you can have defacto ownership of assets without having to disclose ownership ..... Who really owns the S&P 500, the US debt?The derivatives market is much much larger than the actual financial markets upon whihc they are collateralized.
- 1 vote
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