CFTC Commissioner Scott O’Malia issued a stern warning to financial regulators in the United States and abroad that market fragmentation could have grave consequences on the world financial system.
The CFTC has released a request for comment on around 70 questions regarding swaps-data reporting and how to use the data it collects from companies like Depository Trust & Clearing Corp. and CME Group Inc.
Several commissioners have spoken out over the CFTC’s no action letters, finding that many of them were instituted without leaving them enough time to give their own input into the matter.
The EU is set to implement new European derivatives rules this Wednesday in an attempt to begin bringing more transparency to the $700 trillion dollar market that has been blamed for being a major factor in the 2008 financial crisis.
Masters has been working in the swaps industry for well over a decade, and helped JP Morgan begin using credit default swaps to hedge bank risks.
The European Union’s plan to quell big banks’ proprietary trading has been met with criticism from French banking lobbyists who say it will give an advantage to US banks, which would not be affected by the new rules.
The first task of the IVSC, it seems, will be developing a benchmark by which to base this valuation. There is currently little to no guidance on how to price an asset contained within a company’s account, particularly when there is no market for the asset.
the European Union has successfully come to an agreement on a market rule overhaul that will tighten measures to regulate the derivatives market, slowing down high frequency trading and curbing speculation in commodity derivatives.
According to CFTC.gov, five federal agencies have approved an interim rule that will allow banks to keep certain securities, namely collateralized debt obligations, which are backed by trust preferred securities (TruPS CDOs).
The driving force behind this reform comes from public and political complaints over the risk involved with having banks trade physical commodities like crude oil and aluminum.