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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (39596)	8/24/2005 3:53:40 PM
From: Paul Kern	Read Replies (1) \| Respond to of 110194

=DJ NY Fed Calls Meeting With Wall St Banks Over Derivatives By Michael Mackenzie Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--The Federal Reserve Bank of New York has invited leading Wall Street dealers to a meeting to discuss market practices within the rapidly growing yet still relatively opaque market for credit derivatives. New York Fed spokesman Peter Bakstansky confirmed the meeting will take place Sept. 15, but wouldn't confirm the identity of the banks invited. "There are a set of market practice issues that would benefit from a discussion between market participants and regulators," said Bakstansky, reading from a letter sent by New York Fed President Timothy Geithner to dealers on Aug. 12. Each bank has been asked to send a senior business and risk managent representative to the meeting, said Bakstansky. He added, that the meeting will focus upon trade settlement and assignment issues. The credit derivatives market is dominated by a handful of banks including JP Morgan & Chase Co (JPM) Deutsche Bank AG, Morgan Stanley (MWD) Goldman Sachs Group (GS) and Ciitgroup (C). Goldman Sachs declined to comment, while the other banks couldn't immediately be reached for comment. According to the International Swaps and Derivatives Association, the notional value of credit default swaps outstanding has increased nine-fold in just three years to $8.4 trillion at the end of 2004. Credit derivatives are insurance products that allow investors to both protect themselves against risk and take positions on parallel movements in different parts of the capital markets. Fixed income and derivatives markets have taken some big hits in recent years, only to absorb the blows and keep Wall Street profiting from the business of trading interest rate, credit, currency and commodity risk with an ever growing universe of hedge funds and other investors. The New York Fed letter follows the publication of a report last month by a group of dealers, under the moniker 'Report of the Counterparty Risk Management Policy Group II', entitled 'Toward Greater Financial Stability: A Private Sector Perspective'. Its findings were on the one hand soothing: "Recent developments in financial markets have reduced the already low probability of systemic financial shocks," whereby a problem in one area of trading sparks a domino like collapse that roils global markets. On the other: "Innovation and new products have helped to diversify and distribute risk, but they have not eliminated it." Ultimately, the report said "it is impossible to anticipate the specific triggers and timing of financial disturbances that morph into systemic financial shocks." Federal Reserve Chairman Alan Greenspan and others have praised the role of the derivatives market in recent years in diluting financial risk. -Michael Mackenzie; Dow Jones Newswires; 201-938-5451; michael.mackenzie@dowjones.com (END) Dow Jones Newswires 08-24-05 1516ET Copyright (c) 2005 Dow Jones & Company, Inc.

To: russwinter who wrote (39596)	8/24/2005 3:55:31 PM
From: mishedlo	Read Replies (4) \| Respond to of 110194

"Credit Event" is a good term isn't it? Mish

To: russwinter who wrote (39596)	8/24/2005 5:04:11 PM
From: ild	Read Replies (1) \| Respond to of 110194

I attribute low VIX to proliferation of volatility selling funds. Volatility has been going down since 9/11 event and it looks to me that hedge funds continue shorting it. They are shorting poots on stocks and indices hoping that Greenspan's put will save them if they get into trouble. Remember when some home builder was going to start a fund selling covered calls? Schaeffer called recent volatility selling as "stooping for nickels and dimes in front of a steamroller" schaeffersresearch.com schaeffersresearch.com