Isda worried about OTC regulation threats

The International Swaps and Derivatives Association is still voicing concern about attempts by US Californian Democrat senator Dianne Feinstein to regulate the energy and commodity derivatives market.

Speaking at Isda’s members update in London this morning, Keith Bailey, Merrill Lynch managing director and Isda chairman, said Feinstein is suggesting regulation that “is not, in our view, proportionate or appropriate". Feinstein introduced legislation in February that sought to expand regulatory oversight of the over-the-counter energy commodity derivatives market in response to Enron’s collapse. But Feinstein had her plans defeated in a routine procedural vote in April that required 60 affirmative Senate votes for her proposed amendment to advance.

Nevertheless, Feinstein is still proposing changes that will seek to give the Commodity Futures Exchange Commission regulatory oversight of OTC derivatives. Republican senator Richard Lugar, representing Indiana, and Democrat Tom Harkin, representing Iowa, have also introduced proposed OTC regulation that Stacy Carey, Isda policy director, said goes beyond Feinstein’s original proposals. The new regulation could impose a transaction tax, Carey added.

“I don’t understand where some of these ideas originate from,” Bailey said. “Regulators and politicians need to understand how much value they are affecting. There is a tremendous burden on them not to overstep their mark.”