The SEC/CFTC carve up emerges

By Felix Salmon
June 24, 2009

Swaps asks if I missed the bit of Mary Schapiro’s testimony on Monday in which she proposed how to carve up the world of over-the-counter derivatives — the answer is that yes, I did. But here it is:

Stated briefly, primary responsibility for “securities-related” OTC derivatives would be retained by the SEC, which is also responsible for oversight of markets affected by this subset of OTC derivatives. Primary responsibility for all other OTC derivatives, including derivatives related to interest rates, foreign exchange, commodities, energy, and metals, would rest with the CFTC.

This seems to be eminently logical and intuitive to me. Might it be that what could have been shaping up to be a massive fight between the SEC and the CFTC is in fact set to be settled amicably and sensibly? Or are big turf fights over exchange-traded options still to come?

5 comments

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So an investor who wanted to swap the returns of the S&P 500 for the returns of a basket of commodities would have his OTC swap regulated by both entities, huh?

Boy oh boy, this is gonna be fun!

The CFTC is a worse than a waste of taxpayer money.

Everyday they let banks like Goldman Sachs and JP Morgan short gold and silver they can’t deliver.

Why the pretense of contracts if our government wastes valuable resources on outright fraud.

Every subhuman that workis at the CFTC should be ashamed.
They are destroying our nation by allowing the fraud perpetrated by the big banks to continue.

Don’t invest in the US, we are a den of crooked thieves!

Posted by William Kirby | Report as abusive

I LOVE this. LOVE IT LOVE IT LOVE IT
Asked if he missed the reporting aspect, Felix admits it, but does that stop him from shooting his precious mouth off? Nooooooo!
Memo to Tom Gloucer:
Keep throwing money at opininated children like Felix. That way Dow Jones and Bloomberg will continue to eat your lunch. You go right ahead and keep this blogging thing sucking deeply on your resource teat. (BTW, how’s that Second Life Bureau working out? SupermoneyfurnaceDOTCOM!!!)
In the meantime Bloomberg and DJ will continue to bring lots of news to those of us willing to pay for it.
Let’s put it this way: If Felix weren’t FREE would YOU pay to read this drivel? Including this post? That’s the REAL test, my friends.

Posted by Felix The Loser | Report as abusive

CDSs, Derivatives are a completely opaque and unregulated market representative of tens of trillions. Unfortunately, the SEC/CFTC failed their mandates in their current form and why they should not be the regulators or oversee this market. Both are too connected to politicians, to the masters of the universe who utilize these markets which ultimately is a market that produced much the leverage/debt the taxpayer now owns.

Witness last year oil prices, Goldman Sachs predicting at the peak of that spike oil would rise to $250/ppb further ramping up oil/gas prices on speculation. That entire market of futures commodities is also opaque/abusive and last year produced not only insane volatility in the energy markets but also produced starvation in developing nations on other commodities and a triple whammy of inflation for US consumers. Goldman ALONE made over 2 billion just in future’s oil trades in the first half of last year.

Phil Gramm’s 1999 CFMA was buried in legislation, never debated or vetted, opened these markets up to speculators, institutional investors, with their billions to affect these markets. It is hardly is representative now of ‘price discovery’ or fundamentals of supply/demand. Prior to that these markets functioned very well for over 60 years.

The SEC/CFTC proved to be impotent in their mandates. The free-for-all in CDSs, derivatives a direct link to the massive leverage and debt of delusional speculation and profiteering. Time for a new regulatory body which is regularly refreshed with new blood to prevent the obvious serial blindness resulting from incestuous relationships in the current regulatory bodies. Its time for some ‘innovation’ and fresh thinking.

Posted by NS | Report as abusive

So where does GLD fit in seeing as the actual metal is the udnerlying?

Her definition is quaint, but will probably require about 100 pages of lawyer tongue.

Posted by rawr | Report as abusive