Magazine article American Banker

Advice to Traders: To Avoid Regulation, Police Yourself

Magazine article American Banker

Advice to Traders: To Avoid Regulation, Police Yourself

Article excerpt

WASHINGTON -- The financial services industry can keep federal regulators from intervening more heavily in the derivatives and over-the-counter market by adopting proposed "best practices" guidelines, a New York Fed official said Wednesday.

"If you can't take care of your marketplace, then you'll get what you deserve," the official, general counsel Ernest Patrikis, told attendees at the International Swaps and Derivatives Association conference here.

Mr. Patrikis said a group representing industry trade associations has been meeting at the New York Fed since December to draft the voluntary guidelines. He said the group will meet shortly to finalize the draft, before submitting it to other associations for their input.

"If nobody likes it, then we will have gotten it right," Mr. Patrikis said during a press briefing.

A Jan. 17 draft of the guidelines states that buyers and sellers must ensure that the other party is legally authorized to conduct the transaction. And, they said, both must determine that their counterparties understand the terms and conditions of the deal.

One guideline requires a buyer or seller to reject a deal if he believes the other party isn't capable of managing the transaction.

The guidelines also state that parties should not rely on each other for investment advice, and they suggest that participants avoid misunderstandings by exchanging written interpretations of the deal.

Many of the guidelines in the draft provide common sense advice. …

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