VIEWS: 31 PAGES: 3 CATEGORY: Business & Economics POSTED ON: 6/11/2010
Credit default swaps are important to corporations directly because they allow companies to protect themselves against the risk that partners or suppliers may go into bankruptcy, according to John O'Neill, manager of CDS at Liffe, NYSE Euronext. Chairman of the Senate Agriculture Committee, Sen Tom Harkin's Derivatives Trading and Integrity Act (S. 272) stipulates that all futures contracts (CDS are futures) must trade on a designated contract market or a derivatives transaction execution facility. Chances are strong in 2009 for passage of the Harkin legislation as well as for a bill currently in draft form from House Agriculture Committee Chairman Collin Peterson. The draft prohibits credit default swap trading in cases where investors don't own the underlying bonds.
the complete guidance,” and you’ll be taken to the AICPA website, where all orders are processed. IMA members are eligible for the AICPA member discount, so scroll LETTERS down the page to find the relevant information and coupon code. GOVERNMENT Designing Effective Controls I read with great interest Curt Verschoor’s ethics article in the January issue of Strategic Finance. As we see a new administration take office there will be a significant need Regulation of Credit for re-regulation of practically every federal agency. The shortcomings of the financial industry are being replicated Default Swaps in other aspects of our daily lives. One has only to look at By Stephen Barlas, Editor the tomato and peanut industries to see how the FDA’s mis- management fails to protect the American public. FEMA’s Will new federal regulation of credit default swaps response to Katrina was symptomatic of a dismantling of (CDS) affect corporate finance? Considering the regulation and government effectiveness that began at the important role CDS have come to play in protecting top. Professional accountants can and must help with the risks that banks feel they take on when they buy designing effective controls which help ensure our govern- corporate bonds, the answer is “Heck, yes!” CDS are ment runs both effectively and efficiently. This will certainly important to corporations directly, too, because they be critical as we straighten out the mess in the financial allow companies to protect themselves against the risk industry. As Curt’s article indicates, the genesis of the prob- that partners or suppliers may go into bankruptcy, lem started in the early 1980s and accelerated in according to John O’Neill, manager of CDS at Liffe, 2001….As his column points out, there were many ethical NYSE Euronext. Bills have already been introduced in lapses tracing back to a culture of greed. However, there formal and draft forms requiring CDS to be traded on was also an attack on the fundamental systems we use to a national exchange, with transparency, and for those
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