Shining the Light on Derivatives

New rules are imminent for derivatives trading activities and are aimed at addressing the lack of transparency into counterparty risk that contributed to the current economic crisis.  The Obama administration is moving forward with a plan to require certain derivatives to be traded via a central clearinghouse and others to be traded on open exchanges.  Here is an excerpt from yesterday’s press release from the U.S. Treasury.

As the AIG situation has made clear, massive risks in derivatives markets have gone undetected by both regulators and market participants. But even if those risks had been better known, regulators lacked the proper authorities to mount an effective policy response. Today, to address these concerns, the Obama Administration proposes a comprehensive regulatory framework for all Over-The-Counter derivatives.  Moving forward, the Administration will work with Congress to implement this framework and bring greater transparency and needed regulation to these markets. The Administration will also continue working with foreign authorities to promote the implementation of similar measures around the world to ensure our objectives are not undermined by weaker standards abroad.

This is a step in the right direction, but the details and timing of such changes remain to be seen. Also, it may require a great deal of coordination among several different regulatory bodies.  That may hamper what is on the surface a simple, straightforward plan.


About Wheelhouse Advisors
Wheelhouse Advisors LLC is the publisher of The ERM Current™, an online publication and blog dedicated to providing the latest updates on current trends in Enterprise Risk Management & Control. Wheelhouse Advisors provides cost-effective Enterprise Risk Management & Control solutions to both large and mid-size corporations. To learn more about Wheelhouse Advisors, please visit our web site at

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