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The Commodity Futures Trading Commission (CFTC) will make official a Wall Street victory today when it announces softened regulation on derivatives trading. After pressure from bank lobbyists, a rule that would have increased competition in the market for derivatives—financial products that derive their value from an underlying asset—could now empower a few big financial institutions to rule that risky space. Ninety percent of the now $700 billion derivatives market that nearly brought down AIG and helped cause the 2008 financial crisis is currently controlled by the five biggest banks, yet derivatives are still traded in largely unregulated shadow markets.
While a provision in the Dodd-Frank financial-reform law was designed to force derivatives onto regulatory platforms resembling public exchanges, implementation was left to the CFTC. Today's approval of the rule helps fulfill that duty, but opponents worry it leaves flexibility for big banks—who held more than 80 meetings with CFTC members over the past 3 years—to return to their "old, opaque way of doing business," according to Marcus Stanley, policy director of Americans for Financial Reform. "If flexibility means it’s more beneficial to the banks, so be it," says CFTC member Mark Wetjen. "But it also means it’s more flexible to all market participants and the marketplace as a whole."
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CHART OF THE DAY
People in eight European Union member states were asked about their ongoing monetary union, and fewer this year were in favor of it than last. Couple that with British anti-E.U. sentiment that has continued to grow in recent months, and GDP that has declined throughout the continent for six consecutive quarters, and you've got a recipe for economic and political resentment.
REASON TO GET OUT OF BED IN THE MORNING
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