The Financial Times is reporting AIG is ignoring the new rules on derivatives.
The unit that all but destroyed AIG has failed to sign up for the overhaul of the global derivatives market which was given added impetus by the troubles at the US insurance group.
AIG confirmed that its financial products unit, whose soured bets on credit default swaps forced the company into government hands last year, did not adopt the “Big Bang” protocol that has been signed by more than 2,000 market participants.
The protocol, created under the auspices of International Swaps & Derivatives Association, is intended to make it easier for investors in the opaque market for credit derivatives to know what will happen to their contracts if debt defaults occur. It came into force on Wednesday.
The Big Bang Protocol is a self-imposed intermediary step to create a standard for settling contracts. The idea is to move to a central clearing house to create transparency for derivatives.
Blogging Stocks says the big bang protocol is all smoke and mirrors anyway. He points to how this is only in the United States and applies not to CDOs, CLOs, but to CDSes.
While the blogging stocks article date is from April 8th, this bomb fact was also mentioned:
The Tri Optima, a trade processing group, said it has removed $5.5 trillion dollars of redundant contracts from the market in the first 3 months of the year. Let me say that again --$5.5 trillion dollars has simply evaporated.
Anyone else have some insight into $5.5. trillion of redundant contracts being removed please leave a comment.