CFTC's Chilton Says Global Swaps Markets Face Risk of `Race to the Bottom' ...

Snip from article below

"Derivatives, including swaps, are financial contracts tied to a stock, bond, currency or event, such as a company default.

"The global swaps market was $583 trillion as of last June, according to the Basel-based Bank for International Settlements"

March 28, 2011

CFTC's Chilton Says Global Swaps Markets Face Risk of `Race to the Bottom' ...

U.S. and European financial regulators would risk a “race to the bottom” if they proposed different rules governing the $583 trillion global swaps market, said Bart Chilton, commissioner at the U.S. Commodity Futures Trading Commission.

“We shouldn’t open the door for regulatory arbitrage or trading migration to the least or most poorly regulated trading environments,” Chilton said in a speech prepared for delivery today in London at a Goldman Sachs Global Commodity Conference.

Regulators are drafting rules for the derivatives market after largely unregulated transactions helped fuel the 2008 credit crisis.

The CFTC and Securities and Exchange Commission are leading U.S. efforts required under the Dodd Frank Act, signed into law by President Barack Obama last July. The law seeks to reduce risk and boost transparency by having most swaps guaranteed by clearinghouses and traded on exchanges or other platforms.

The EU’s focus only on derivatives traded away from exchanges may lead to gaps in regulation in the region compared with the U.S., Gary Gensler, chairman of the CFTC, said in Brussels on March 22. U.S. lawmakers have tasked regulators with determining whether other nations should be recognized as having rules that are “comprehensive and comparable” with those in the U.S., Gensler said.

Differences in trading regulations may lead banks and other market participants to shift where they conduct business, according to a Feb. 18 report from a technical committee of the International Organization of Securities Commissions.

Derivatives, including swaps, are financial contracts tied to a stock, bond, currency or event, such as a company default.

The global swaps market was $583 trillion as of last June, according to the Basel-based Bank for International Settlements.

http://www.bloomberg.com/news/2011-03-28/-race-to-the-bottom-at-risk-in-global-swaps-rules-u-s-commissioner-says.html