Tuesday's elections may mean the U.S. Securities and Exchange Commission will collaborate more with the financial industry to increase transparency and prevent another financial meltdown, according to Dick Grasso.
Regulators "have to have a real-world sense of how the markets are evolving,’’ Grasso, the former chief executive officer of the New York Stock Exchange, said in an interview on Bloomberg Television’s "In the Loop." “The election says, ‘Enough of the partisanship that we’ve seen. Let’s come to the middle. Let’s get together with the business community.’”
Republicans seized control of the U.S. House and narrowed the Senate’s Democratic majority Tuesday, capitalizing on concerns about government spending and delivering a rebuke to the domestic agenda of President Barack Obama. U.S. stocks fell as investors awaited the Federal Reserve’s decision on how it will stimulate the economy.
He said regulators need to consider replacing outdated laws that may no longer suit the changing marketplace, not just making incremental changes to those that already exist.
The country needs “intelligent regulation of derivatives,” Grasso said. Derivatives should be included "into the standardized process of clearing and settlement," he said, "bringing the tools of risk management to a transparency level that investors can understand.’’
In July, the Dodd-Frank financial overhaul was signed into law, which gave the Commodity Futures Trading Commission a year to establish rules governing the $615 trillion over-the-counter derivatives market, including which companies will be categorized as swap dealers or major swap participants. The law aims to stem systemic risk by requiring most interest-rate, credit-default and other swaps be processed by clearinghouses after being traded on exchanges or swap-execution facilities.
“There is so much that you can point to as the cause of the financial meltdown in 2008 that wasn’t subject to regulation — products that didn’t exist when the regulations were written,” he said.
© Copyright 2022 Bloomberg News. All rights reserved.