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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (7248)	10/27/2005 11:50:30 AM
From: Louis V. Lambrecht	Read Replies (1) \| Respond to of 33421

Ouch! Old story, but the reason behind evaluations of that netting in the quarterly OCC Bank Derivatives Report of the Comptroller of the Currency. (Which I don't seem to find on the site anymore) Bilateral Netting: A legally enforceable arrangement between a bank an counterparty that creates a single legal obligation covering all included individual contracts. This means that a bank's obligations, in the event of the default or insolvency of one of the parties, would be the net sum of all positive and negative fair values of contracts included in the bilateral netting arrangement.(Typed over). In the case a broker would file for bankruptcy, the balance of the accounts would not be used to pay a dividend to the lenders or right owners in general. Instead, the accounts between banks and brokers would be netted first. In essence to avoid a domino effect as the industry would lose less in netting, then getting some cents on the dollar if any (as any other lender) under Chap 11. Darn interesting publication it was. Still have the second quarter 2002 on file. And no way to find recent similar papers, even using the site's search engine.