The Obama Administration’s blue print for regulatory reform rolled out this week did not pick winners in the battle for regulatory jurisdiction over the vast over-the-counter derivatives market. Both the Commodity Futures Trading Commission and Securities and Exchange Commission, among others, have been lobbying for the job since it became clear these markets, particularly credit default swaps, would face greater regulation. The blue print states that both regulators would have a hand in overseeing these markets with the Federal Reserve at the top to monitor systemic risk.
The last time the CFTC and SEC were given joint regulatory jurisdiction over a product the results were not that good. The two agencies oversee Security Futures Products (single stock futures) and many in the industry blamed the failure in the United States (they have been successful overseas) of those highly anticipated products to the joint regulatory structure.
The Obama Administrations’ proposal asks these agencies to work together on credit default swaps and other OTC products.
Given what these products have done to our economy perhaps there is a reason the Administration asked the CFTC and SEC to work together.
