Regulators could stifle retail derivatives development, warns speaker

Overly strict financial regulations could stifle the development of derivatives products for retail investors, warned a keynote speaker at an international derivatives conference today, co-hosted by the Futures and Options Association (FOA) and the Futures Industry Association (FIA).

Donald Brydon, chairman of AXA Investment Management and chairman of the practitioners' panel of the UK Financial Services Authority (FSA), in noting the development of guaranteed savings products, said: “We all need to be on guard lest regulations should stifle initiatives in the retail application of derivatives.”

Brydon also highlighted the importance of risk mitigation instruments in unstable markets, and said the benefits of derivatives “far exceeds” their costs.

Brydon also noted the “attempts by investment banks to proclaim they know what’s best for their clients – investment managers”. “This is not the case,” he said. Brydon gave the example of the development of exchange-traded funds, which “dis-intermediates investment managers”. He added that investment managers are now doing more collateralised debt obligations and structured products, which is normally the preserve of the investment banks.