Derivs - Regulation

A sharply different approach to reforming credit rating agencies from the one Capitol Hill has been working on won support Tuesday from House Financial Services Committee Chairman Barney Frank (D-Mass.).

Researchers at Goldman Sachs have offered an estimate of risk reduction from clearing over-the-counter derivatives. Specifically, they calculate that introducing clearing for dealer-to-dealer trades will yield 16 times the counterparty risk reduction than would be achieved for trades between non-dealers.

Exchange and bank executives debated the likelihood of most over-the-counter derivatives moving to central clearing at yesterday's Securities Industry and Financial Markets Association conference in New York. A fiery editorial last Monday from Citadel founder Ken Griffin that urged mandated clearing got people talking.

If financial reform is like war—as U.S. Treasury Department Secretary Tim Geithner put it at the conference—then Wall Street CEOs would be on the other side of the battlefield from the government.

Standardized documents for Shariah-compliant credit default swaps are not close for the simple reason that the underlying derivatives don’t pass muster in their current form with Islamic scholars.

Executive compensation was another big talking point at the conference, in the wake of the U.S. pay czar Kenneth Feinberg announcing sweeping caps at firms bailed out by the government.

Amid plans for a systemic risk regulator in the U.S., panelists at this morning’s Securities Industry and Financial Markets Association conference in New York rehashed some well-trod ground: who was to blame for the crisis and what role derivatives played.

Mary Schapiro, chairman of the Securities and Exchange Commission, told Derivatives Week this morning she believes a derivatives reform bill could be on President Barack Obama's desk before year-end.

London firm Future Value Consultants is planning to roll out its independent research database for retail structured products in the U.S. in January. The service will be on a new Web site--StructuredEdge.com.

Some swap counterparties to Lehman Brothers are arguing that they shouldn’t have to make payments, even after the U.S. bankruptcy court recently ordered one such firm, Metavante Corp., to pay up. At issue is whether a firm with an open swap must keep making payments while Lehman is not making its scheduled payments.

Rep. Collin Peterson’s over-the-counter derivatives bill, which was passed unanimously by the House Agriculture Committee yesterday, garnered Republican support while moving closer to the Obama administration’s regulatory proposal.

The Italian Commissione Nazionale per le Società e la Borsa is consulting with the industry on whether to increase transparency in cash-settled equity derivatives by introducing formal disclosure rules.