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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Henry Volquardsen who wrote (1435)3/26/1999 6:55:00 AM
From: accountclosed  Read Replies (1) of 3536
 
Henry, Mr. Greenspan didn't call for more regulation of derivatives in the banking sector. Do you agree with him on this point? I think many casual observers look to LTCM or even Barings/Nick Leeson and worry about the "rogue trader" or huge directional bets being placed in banks (also BT).

To what extent are directional bets already under FDIC/Fed scrutiny and are those pieces of supervision sufficient? Banks have limits how much of their capital that they can dedicate to HLT's, I assume there are similar limits on speculative derivatives plays.

Also, is the only control over brokerages/trading firms the reality of the marketplace. In other words is the only protection from a LTCM or Barings debacle, the fact that counterparties should do their homework, and then Central Banks have to pick up the pieces if the accident should be too large in their estimation. Is there or should there be proactive supervision between the two extremes of due diligence and bailout? tia
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