Regulators & Regulation in the
The following list is composed primarily of organizations which have an interest in what happens with the Options markets. Each has offered some advice about regulations thereof. However, no less personage than Alan Greenspan has recommended as recently as Mar 1999 that less regulation of derivatives is desirable.
Bank of International Settlements.
Basle Committee on Banking Supervision.
CFTC - Commodities Future Trading Commission (U.S.)
FIA - Futures Industry Association
FASB - Financial Accounting Standards Board
FDIC - Federal Deposit Insurance Corporation
IASC - International Accounting Standards Commission
IMF - International Monetary Fund
IFSE - International Federation of Stock Exchanges
IOSCO - International Organization of Security Commissions
ISDA - International Swaps and Derivatives Association.
OCC - Office of the Comptroller of Currency
SEC - Securities and Exchange Commission
SFA - Securities and Futures Authority
Johnson-Shad Accord (1981)
Financial Services Act (1986)
Commodity Exchange Act (Congressional)
A number of agencies have acted in some small capacity so far. The Financial Services Act of 1986 gives regulation of debt, equity and derivatives to the SFA. However the CFTC governs most derivatives while the SEC governs securities. The Johnson-Shad Accord of 1981 outlawed equity swaps, so LIFFE received the business from all US firms, frequently through branch offices in London. (Corporate Money, 18 Jun. 1997, pp. 1. )
The SEC required all companies with $ 2.5 B of market capitalization to list clearly the potential estimates of future losses from derivatives on 15 Jun. 1997. The Financial Accounting Standards Board moved toward demanding more detailed information in financial statements in 1998. (Asher, Aug. 1998).
US Commodity Futures Trading Commission has allowed entry of European on-line exchanges via the Internet. Congress had forbidden even the proposal of new restrictions before 30 March 1999. The belief is that regulations will stifle US growth, while allowing European domination of the burgeoning industry. The CFTC claims $70 T in underlying asset values are the present stakes of this new investment vehicle.
Several directives are :
Federal Reserve Supervisory Letter SR 96-17; Guidance for Credit Derivatives; Aug. 12 1996; FDIC FIL 96-92, Supervisory Guidance for Credit Derivatives (Aug. 15, 1996); OCC Bulletin 96-43, Credit Derivatives, (Aug. 12, 1996) ;
Federal Reserve Supervisory Letter SR 97-18, Application of Market Risk Capital Requirements to Credit Derivatives. (June 13, 1997)
Hunt, Szymanski & Baek (1999)
Chicago Board Options Exchange Market Volatility Index, VIX, tracks daily price swings of various S&P 100 index options. This is useful in determining risk and probabilities. Price drops are considered as having a higher probability than price rises.