Reform of US OTC derivatives is gathering momentum in Congress, amid a storm of hot air. Philip McBride Johnson has some advice for legislators on achieving a sane solution.
The Obama administration’s proposal for reforming over-the-counter derivatives is a little sheepish about defining the roles of the Securities and Exchange Commission and the Commodity Futures Trading Commission.
But otherwise, it is fairly clear in advocating a model familiar to those of us in the futures markets: open and competitive trading through regulated exchanges, with credit support by central clearing counterparties.
Implicitly, the Obama team is acknowledging that the Best and Brightest can fail when left to their own devices, but with one difference – they fail far more spectacularly than you and I would.
Meanwhile, bills emerge in Congress almost daily with some of the administration’s ideas but a few tweaks of their own. It would be the...