A New Report From Aite Group
While there may not be a one-size-fits-all solution, a single regulator would be a welcome improvement to the existing regulatory structure.
A new report from Aite Group, LLC provides an update to likely changes to regulatory structure that will alter the derivatives market in the wake of the financial crisis, and looks at the scenarios that brought the marketplace to its current state, and what will be necessary to get the system back on track. It also examines how disparate groups – from loan originators to hedge funds – will be affected by this restructuring; It also considers the possibility of a transaction fee/tax on futures and equity options transactions, as well as mandating the clearing of over-the-counter (OTC) derivatives through an exchange clearing house.
While everyone can agree that regulatory changes are needed, a one-size-fits-all solution does not seem to exist. The one consistent cry out of Washington is for a systemic regulator that can oversee the entire financial marketplace and prevent firms from creating a cascading affect on other markets. The major problem is the possible designation of certain firms being a potential systemic risk. Having such a designation would create an unfair marketplace for those firms that are not deemed a potential risk. They would not be able to compete against others who would have the implied backing of the Fed Reserve and Treasury.
"The hope still remains for a bipartisan agreement on U.S. regulatory make-up," says Paul Zubulake, senior analyst with Aite Group and author of this report. "Both sides agree that a systemic regulator is necessary. Aite Group feels that the best solution would be for a sufficiently funded unified regulator that can be created from the existing structure. Making the Federal Reserve the systemic regulator is not a long-term solution as it needs to concentrate on managing its massive portfolio, which will eventually need to be unwound."
This 22-page Impact Note contains seven figures and two tables. Clients of Aite Group’s Institutional Securities & Investments service can download the report at the Aite Group web site.
Related Aite Group Research:
* Hedge Fund Market: It’s Alive!
* Futures Overview: From Front to Back
* Exchange-Traded Commodities: A Primer
* OTC Derivatives Processing: Life on the Edge