Tougher Derivatives Rule given clearance by Senate Panel
As per the new legislative that has been approved by a Senate panel, Wall Street’s ability to trade derivatives has been reduced to some extent.
Senate Agriculture Committee Chairman Sen. Blanche Lincoln, who had offered the bill felt that the bill would help in improving traparency around derivatives trading.
Derivatives are used by companies to hedge against risks but speculations around derivatives have been partially instrumental in the financial crisis in the recent years. This approval by the Senate panel is seen as a step towards the overall approval of the Senate bill to bring in greater regulations in the financial sector.
The senate could floor the bill by the end of the week or by Monday. Derivatives that are used for hedging foreign currency exchange rates have been exempted from the bill by an amendment by Senator Blanche Lincoln. The senator said on Wednesday morning that she took the decision after having discussions with Senators from both the parties..
The exemption will only be enforced basis the written ruling by the Secretary of the Treasury. “This bill is surgical in its approach,” Mrs. Lincoln said in her opening remarks. “We have an important but narrow end-user exemption, appropriate restraints on the regulator where necessary and provisions that recognize we are competing in a global financial world.”
However, Senator Saxby Chambliss felt that the bill will also strangle the free trade of0020community banks and special agriculture banks through its stiff regulations.
“All of a sudden, they are going to be treated like Goldman Sachs or those major firms on Wall Street,” Mr. Chambliss said.
The chairman of Commodity Futures Trading Commission, Gary Ginlser had a difference of opinion on the issue and opined that the bill would ensure that community banks were treated differently than the big banks.
