Derivatives Dithering Drives Dilemma
In the just released CFA Institute Financial Market Integrity Outlook Survey (PDF), derivatives reigned supreme as the No. 1 global concern for financial markets. CFA Institute members in eight of the 16 largest markets surveyed indicated that use and disclosure of derivatives is the most serious ethical issue facing global markets in the coming year.
Clearly our members do not believe the efforts of regulators around the world have sufficiently addressed what Warren Buffett prophetically labeled “financial weapons of mass destruction.”
While much attention recently has focused on exchange trading and central clearing in the U.S. and Europe, it appears that calls for the globally coordinated derivatives framework we heard about in the wake of the financial crisis have largely disappeared, as individual countries carve out their own path in derivatives regulation before moving on to harmonize rules worldwide.
Will the incremental steps taken on derivatives serve us well in the next financial crisis (yes, there will be one – don’t pretend to be shocked)? Or will we look back and curse our complacency?
Our members say they are still concerned. Should you be?