Archive of “experience in compliance”

September 17, 2009

Bloomberg Sep 8th, 2009 – Legislation to police trades – mandates cost you $

Sept. 8 (From Bloomberg) — U.S. regulators will need budget increases “orders-of-magnitude larger” than current levels to police trades in the $592 trillion over-the-counter derivatives market, according to Tabb Group analyst Kevin McPartland.
Congressional legislation now being considered mandates that repositories be established to record and monitor every swap trade entered into between banks, hedge funds and other users of the private market. The Commodity Futures Trading Commission, the Securities and Exchange Commission and the Federal Reserve are possible regulators.
The world’s largest banks will spend about $4.7 billion on risk-management technology systems this year, according to a report by McPartland to be published tomorrow by Tabb Group. The combined budgets of the CFTC and SEC amount to $1.3 billion in comparison. The CFTC’s technology spending was $26 million last year, he said.
“Investment banks spend more than three times that amount each month on technology,” McPartland writes in the report.
He suggests a transaction tax on OTC trades, increased fines at the CFTC and SEC or mandatory contributions from banks and investment firms as three ways to pay for the regulatory technology upgrade.
“The answer is not for Congress to allocate more money to regulators as the U.S. federal budget deficit is big enough already,” McPartland wrote. “Required up-front contributions would be higher as the new infrastructure was built from scratch, and later lowered as the system became more mature.”
To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net
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