Just five years ago, foreign derivatives trading by the American International Group in London nearly brought American firms to their knees.
WALL STREET JOURNAL 4 Years After Lehman's Demise, Regulators Debate Overhaul | Mark Wetjen, a Democratic member of the Commodity Futures Trading Commission, told an industry group that the agency was debating how to crack down on foreign derivatives trading.
There were also announcements about new domestic criminal offences for market abuse that involve foreign exchange, derivatives and bonds.
In an announcement on Friday afternoon — the time slot favored by officials eager to avoid scrutiny — the Treasury Department said it intends to exempt certain foreign exchange derivatives from key new regulations under the Dodd-Frank law.
Late Friday afternoon, the Treasury Department announced that it was exempting certain foreign exchange derivatives from rules under the Dodd-Frank reform law that are intended to reduce risk and increase transparency.
In the fourth quarter, some of the foreign exchange derivatives at Morgan Stanley's bank had a positive fair value of $30.8 billion, and some had a negative fair value of $24.4 billion, according to the bank's regulatory filings.
Under the Dodd-Frank financial reform legislation enacted last year, the Treasury secretary was given the power to determine whether the narrow subset of foreign exchange derivatives should be tightly regulated.
The Obama administration foolishly added to the opacity last year when it exempted certain foreign exchange derivatives from new rules under the Dodd-Frank financial reform law, despite research and analyses showing considerable risks in the exempted instruments.
The Group Treasury segment operations are involved in proprietary trading in fixed income securities and foreign exchange, derivatives trading and structuring, managing customer-based foreign exchange and money market transactions, funding and investments in ringgit and foreign currencies.
Though he wasn't there at the time, Meyer says Harvard Management bought the commodity and foreign stock derivatives as a way to get exposure to those asset classes while freeing up cash to put to work elsewhere.
"While I hope that their optimism is warranted, it is important to realize that this survey was done during a six week rally in the DAX and as we have seen already, optimism can turn to pessimism on a dime," cautioned Dan Cook, chief market analyst at IG Markets, a European-based Forex and foreign exchange derivatives trading outfit that's been trading currencies since 1974.
