The Motley Fool Discussion Boards

Previous Page

Investment Analysis Clubs / Macro Economic Trends and Risks


Subject:  Derivatives rules -- loose as usual Date:  5/16/2013  12:43 PM
Author:  WendyBG Number:  423017 of 479895

May 15, 2013
Big Banks Get Break in Rules to Limit Risks

Under pressure from Wall Street lobbyists, federal regulators have agreed to soften a rule intended to rein in the banking industry’s domination of a risky market.

The changes to the rule, which will be announced on Thursday, could effectively empower a few big banks to continue controlling the derivatives market, a main culprit in the financial crisis.

The $700 trillion market for derivatives — contracts that derive their value from an underlying asset like a bond or an interest rate — allow companies to either speculate in the markets or protect against risk.

It is a lucrative business that, until now, has operated in the shadows of Wall Street rather than in the light of public exchanges. Just five banks (JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley and Goldman Sachs) hold more than 90 percent of all derivatives contracts.

...under the trading commission’s new rule, wide swaths of derivatives trading must shift from privately negotiated deals to