Ritholtz: Insurance Regulators Should Oversee Derivatives
March 13 (Bloomberg Law) — Barry Ritholtz, CEO at Fusion IQ, and Tangent Capital Partners’ Bob Rice talk with Bloomberg Law’s Lee Pacchia about the current state of the derivatives market and a recent initiative by ISDA to write new standards for credit-default swaps.
Ritholtz says that the multi-trillion dollar derivatives market remains largely unregulated despite nearly destroying the global financial system during the credit crisis in 2008. “There are a number of different asset classes and financial instruments…derivatives are the only one more or less exempt from oversight,” he says. Ritholtz suggests that state insurance regulators should cover derivatives and force participants to put up reserves on their investments.
Rice contends that regulation of the derivatives space is difficult because the products represent generate tremendous profits at the world’s largest financial institutions. “[Banks] have no interest in standardization or clearing organizations because it squeezes their margins,” he says. Still, he thinks there will have to be some increase in oversight because regulators need a more precise understanding of activity in the derivatives market.