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Fight Brews on Changes That Affect Derivatives 

August 15, 2014
Peter Eavis, Dealbook

Tensions are building in an enormous market that nearly brought Wall Street to its knees in 2008.

Financial regulators are pushing for an arcane but crucial modification to the contracts that stand behind the $700 trillion global market for derivatives. The change is part of the regulators’ efforts to avoid the sort of systemic chaos that occurred after Lehman Brothers crashed.

Large banks and investment firms, however, are concerned that the adjustment — which would affect how trades are treated when a bank fails — could weaken their legal rights and may even make the market for derivatives riskier. The financial firms have been expressing their fears in talks with the Federal Reserve and the Federal Deposit Insurance Corporation, the bank regulators behind the push.

While Wall Street is largely resigned to the regulators’ ultimately getting their way, it is nevertheless pressing for measures seen as protections in return.

Read more: Dealbook

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