The Start of Another Financial Crisis
It's a deja-vu%3A the stability of the global markets could soon be under threat due to a looming crisis in the derivatives industry.
February 19, 2013
The stability of global markets could be once again threatened by another massive financial derivatives crisis%2C according to market participants.NL NLDue to a loophole called the “futurization of swaps” as a result of a change in the way derivatives are packaged and sold%2C traders are bypassing regulations aimed at containing risk and instead%2C are investing more money in riskier trades.NL NLAs a result of the 2008 financial crisis and the ensuing Dodd-Frank regulation%2C investors are now required to set aside enough capital to cover losses on their derivatives trades.NL NLBut traders are now bypassing these margin requirements by repackaging swaps into futures. Futures are less regulated%2C allowing investors to take larger positions while reserving smaller amounts of cash.NL NLCompanies that operate futures exchanges say the shift from swaps to futures is a natural evolution in the marketplace and that futures exchanges have a sound track record of carefully managing r... Read full story on Wall Street & Technology
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