Reform or a Blowup? The Derivatives Industry Looks Set To Lose To Regulators One Of Its Most Crucial Lobbying Battles…. ‘Too Much Regulation On Derivatives Will Boost commodities Prices’…. JP MORGAN CEO : “WE OPPOSES ANY REGULATION IN THE $ 600 TRILLION DERIVATIVE MARKET …….WE ARE FINE !! “
July 20th, 2013
Dealers losing battle over uncleared swaps
The derivatives industry looks set to lose to regulators one of its most crucial lobbying battles, which could effectively kill off the market for bespoke OTC swaps. Such instruments are used by financial institutions to hedge interest rate and foreign exchange risk, and provide dealers with lucrative trading revenues.
For more than a year now, derivatives users, led by ISDA, have locked horns with regulators over initial margin requirements for uncleared swaps, arguing that current proposals could create systemic risk and harm the global economy by preventing crucial hedging activity.
“Sometimes, people overlook the fact that the derivatives market is needed by end-users to manage their risk,” said Fred Janbon, global head of fixed income at BNP Paribas. “If it disappears, companies won’t be able to issue bonds in foreign currencies and it could heavily impact their ability to export goods. If businesses can’t hedge their financial risks, it creates other risks to the economy.”
Now because derivatives are used SO MUCH amongst companies, their worried that to much regulation will boost commodities prices