The risk to our financial system must be eliminated, not simply regulated. We as Americans should not tolerate our system being put at risk. All OTC derivatives should clear through a Central Counterparty (CCP) with novation and daily margin, so that all swaps counterparties are forced to make good on their bets every day. In addition, all derivatives that can trade on a public exchange should trade on a public exchange so that regulators have real-time transparency and the ability to police these markets for fraud and manipulation.
Please read the entire article for the details on these four loopholes listed below:
- Foreign Exchange Exemption
- End-User Exemption
- “Balance Sheet Risk” Exemption
- Alternative Swaps Execution Facility (ASEF)
Author Adam White calculates just these 4 loopholes (there maybe more), exempts about 50% of the clearing requirement and 100% of the actual trading requirement on all derivatives.
The bill considers about 11 more amendments and final passage today. To date I can verify loophole #1 is in the final bill, but don't assume you're in the clear. That's simply because it's so complex and massive I haven't read everything yet.
Update: Loophole #2 is in the final bill.