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Non-Tech : Derivatives: Darth Vader's Revenge -- Ignore unavailable to you. Want to Upgrade?

To: Bobby Yellin who wrote (990)	10/30/1999 8:29:00 AM
From: Henry Volquardsen	Read Replies (2) \| Respond to of 2794

Hi Bobby, my reaction? a rare moment of sanity from the regulators :) actually I'm glad its resolving itself this way. I agree with those who believe there needs to be regulatory control but it needs to be effective regulation. Regulating specific derivatives and structures would not work. The otc market has to much ability to change and modify structures to side step specific regulation. I spent 20+ years doing just that. Its really pretty easy, static regulations can never be modified quickly enough to keep up with a dynamic market place. All specific regulation does is add inefficiency to the market and inefficiency always translates to higher cost to the end user. As I have posted in past I believe the best way to regulate derivatives is to go internal risk control and capital levels. Regulating specifics is chasing a flame. But all derivatives, regardless of how much modification, have things in common. They need capital to support the structure and they need internal risk allocation. That is where effective regulation can take place. Regulating the amount of leverage the market makers can employ and the amount of capital required to support the activity. This would have the advantage of not discouraging innovation while increasing the overall safety of the system. The good news is that no additional regulation is required for this, the Fed and other regulators already have this authority. That is how they currently regulate the market on an ongoing basis. Henry