London, September 2010

The new US derivatives markets

The Dodd-Frank Act raises a number of serious concerns with respect to how courts will interpret the relationship between swap dealers and OTC trading counterparties under a new regulatory framework. Yet, much still remains to be done. Although the Dodd-Frank Act represents an aggressive legislative effort to create a regulatory system that is capable of detecting and discovering “derivatives bombs” before they undermine the stability of the US financial markets, the goal is not a de facto ban on swaps activity. The challenge for regulators will be to craft rules that provide the degree of stability and oversight that Congress has demanded without stifling an important industry that provides valuable and often irreplaceable risk management tools for many commercial enterprises.

By Athena Velie & Jonathan Flynn

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