Allan Grody, president of Financial Intergroup Holdings Ltd. says that while the intentions of the US regulators are good, their implementation of reforms has thus far been flawed.
The framers of Dodd-Frank were clear eyed in their thinking
that the financial system's risk management methods must be
repaired and data transparency assured, but it was not clear
how to do it. Solutions are needed for implementing financial
reforms, but those that are on the table here in the US,
especially Swaps regulations, have to be paused to make sure
they are logically implemented, integrate with each other and
provide for more permanent solutions on a global scale.
Piling on regulations, the totality of its measures and
impact being unknown, on top of a little understood new
business model for OTC derivatives and an infrastructure not
yet fit for purpose is heading us into the land of unintended
The problem at its
To reflect on the core of the
problem, over a century ago two ideas were presented that would
change the course of our thinking about resolving the financial
crisis of today. One was the french mathematician, Louis
Batchelier’s observation on similarities of
particles floating through liquids and the randomness of price
discovery in financial markets. This observation was used by
others decades later to tie the predictable and mathematically
precise discipline of the physics of fluids in motion to the
mathematics of discovering market prices. No matter that the
precise rules of the physical world where not analogous to
unpredictable human emotion and the psychology of perception
that governs financial markets. The other was the Minneapolis
Grain Exchange’s invention of a central clearing
house for mitigating counterparty risk.
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