Regulators Defend Derivatives Rule
By BEN PROTESS
Regulators approved a rule on Wednesday that spells out the type of derivatives dealers that will soon face federal oversight, a crucial piece of the broader regulation for the market that played a major role in the financial crisis.
The rule, which defines the universe of so-called swaps dealers, has been one of the more contentious rules stemming from the Dodd-Frank regulatory overhaul law. Dodd-Frank, passed in response to the crisis, sought to create new oversight and capital requirements on the firms that arrange swaps.
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He then directed a statement at critics of the rule. “For those who question the level of the de minimis, we considered the threshold in the context of an overall $300 trillion notional swaps market,” noting that $8 billion in hardly significant amid this massive market.
The $8 billion threshold, he said, represents $32 million in notional value of derivatives trading per day. “Putting this in perspective, the interest rate swap market, transacts, on average, over $500 billion notional per day,” Mr. Gensler said. “As further reference, this year the futures markets for crude oil traded, on average, $65 billion of notional per day.”
Under the rule, the C.F.T.C and S.E.C. must study whether the $8 billion figure is appropriate. The agencies could change the figure if it proved too high or low.
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http://dealbook.nytimes.com/2012/04/18/regulators-defend-derivatives-rule/
What's interesting here is Mary Schapiro, who was critical of the recent adjustment to Sarbanes-Oxley, specifically related to increasing the threhold, is doing the same here with this rule.
Another thing, if they need to study whether the $8 billion is "appropriate," how did they come up with that number?
Still, it's fascinating to watch the regulatory rule-making process unfolding and the implementation of the law.
Robert Reich: The Significance of Citigroup’s Shareholder Revolt
http://www.democraticunderground.com/1002579118
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