In late June, Treasury Secretary Henry M Paulson, Jr. unveiled a list of policies he said needed to be reviewed as part of a plan to make the U.S. capital markets more competitive. All of the policies impact derivatives, but three are likely to grab the bulk of attention in the coming months:
Pursuing a Modernized Regulatory Structure. The entire structure of the regulatory system for all financial services providers is underway, and a blueprint for reform is due early next year. Paulson has made no secret of his admiration for nations with a single regulator for banking, equities and derivatives. Look for renewed efforts to merge the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).
Encourage Development and Adoption of Industry Best Practices for Asset Managers and Investors in Hedge Funds. Earlier this year, the President’s Working Group on Financial Markets (PWG) released principles and guidelines for best practices to protect investors and slash systemic risk. Now the PWG is working with asset managers and investor groups to crystallize these principles and guidelines.
Encourage International Investment Opportunities with Recognition of Comparable Regulatory Regimes. The CFTC has long had a policy of mutual recognition between countries with regulatory schemes comparable to the United States, and Paulson would like to see the SEC do the same, if the SEC even exists as a separate entity in the future.
Three other policies under review will likely have a less obvious impact:
Modernize Treasury’s Cash Management and Debt Management.
Complete Basel II Capital Requirements Rulemaking.
Empower All Investors through Financial Education.
