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Wall Street Faces New U.S. Scrutiny of Derivatives Tactic 

July 31, 2014
Silla Brush, Bloomberg

Wall Street banks face heightened scrutiny from the Commodity Futures Trading Commission over their latest tactic to escape U.S. trading rules for overseas derivatives.

The regulator sent letters today to JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp., Citigroup Inc., and Morgan Stanley seeking further information about the practice of removing parent-company guarantees from overseas trades. An agency official who asked not to be named because the letters aren’t public confirmed that they were sent to the banks.

U.S. banks have been relying on the de-guaranteeing process to trade derivatives with other dealers in a way that avoids curbs imposed by the Dodd-Frank Act on the $700 trillion global market. The restrictions were designed to increase transparency and prevent losses booked in overseas units from threatening the stability of a U.S. bank.

Read more: Bloomberg

 
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