Thursday, May 14, 2009

The Debts of the Spenders: CDS and MBS Central Clearinghouses a Step in the Right Direction

Transparency is key.

But what the feds need to do is make something like the Commitment of Traders equivalent data available for all to see - free of charge. This would of course require granting the CFTC greater authority over the OTC markets. As of now, ICE is the only clearinghouse that has been approved by the govt to trade exchange driven CDS (and that is limited mostly to financials).

However, ICE was approved by only 1 regulatory arm - the SEC. The CFTC did not grant its consent as it was seen to be widely favoring ICE's rival, the CME Group (now the CME and CBOT after they merged). This is not surprising when you consider that a considerable number of regulators hands that pack the CFTC come from the Chicago crowd.

The CFTC's inclusion makes sense when you consider that securitization of derivatives is the central core of their mission statement.

I have included a link below to show what the ideal reporting version would look like for CDS and MBS trading positions:
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