FIA Unveils White Paper Recommending Changes to US Derivatives Framework

The Futures Industries Association (FIA) has unveiled a new white paper encompassing a number of different recommendations detailing several improvements for the US regulatory framework that oversees derivatives markets. This includes an emphasis on clearing requirements and the aggregate impact of rules for Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term.

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The latest white paper follows on the heels of similar efforts from the FIA, which advocated for policy reform and a review of US financial regulation earlier this year – a letter was sent by the FIA to touch on several principles.

As such, the latest FIA policy recommendations were developed with input and feedback across the derivatives industry, including a diverse panel of market participants. The paper can be read in full by accessing the following link. The recommendations fall into seven broad categories:

• Eliminate the Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term ratio’s punitive impact on clearing
• Modernize the regulatory toolbox
• Improve end-user access to risk transfer markets
• Simplify reporting rules
• Avoid fragmentation of markets
• Make regulation efficient, effective, and appropriately tailored
• Avoid regulation by enforcement

According to Walt Lukken, President and CEO of FIA, in a statement on the paper: “One of the core functions of derivatives markets is to provide safe and efficient tools for businesses to manage price risk. FIA fully supports the goals of the G20 nations post-crisis to make the derivatives markets safer.”

“However, the cumulative impact of these rules is making it more difficult for market participants to access the markets and tools they need to manage risk. Our recommendations for a smarter and simpler regulatory framework promote growth and access while ensuring the safety and stability of our markets.”

“These recommendations are critical to the continued health and growth of our markets. We look forward to engaging with policymakers on how to reform the regulatory structure so as to revitalize our markets for end-users,” he added.