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Non-Tech : Derivatives: Darth Vader's Revenge
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To: accountclosed who wrote (866)3/27/1999 1:49:00 PM
From: Henry Volquardsen   of 2794
 
A very good summary, a few minor points

2. exposure to the clearing house is still exposure. Bu the clearing house has a fairly transparent structure so its strength can be judged. Also the margin system helps it avoid major problems.

3. it's not an automatic offset. It only takes place if the participants have agreed to it in their master documentation. Banks have been very concerned about credit exposure and many have pushed very aggressively for this language in documentation. It is now almost universal among market makers.

5. there is not a direct restriction placed on this, that I am aware of. The Fed will review what the banks are doing. If they are uncomfortable they will 'talk' to bank management about it. They are pretty effective in these talks.

6,7,8,9. absolutely

Henry
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