Greater Risk Management Role coming to securities Market

Regulators will force securities and futures exchanges to take a bigger role in risk management, Deutsche Boerse AG’s Reto Francioni said.

“Markets are currently entering a new landscape,” Francioni, the chief executive officer of Frankfurt-based Deutsche Boerse, said at a conference in New York today. “The major feature of this new landscape is a trend toward re- regulation.”

Policy makers in Europe and the U.S. are overhauling the $615 trillion derivatives market and examining rules that govern equity trading. In the U.S., the Dodd-Frank Act will require most off-exchange derivatives contracts to be processed and guaranteed through third-party clearinghouses and traded on exchanges or similar systems. Transactions will be reported to trade repositories, which will allow regulators a view of the overall risk in the market.

Regulations are being put in place to address “ineffective risk management practices” and the lack of transparency about prices and the amount of risk firms face with one another, Francioni said at a conference at Baruch College.

The result will be markets that are “much more complex than the one we have gotten used to in the last 10 years,” he said. Regulation will move from national agencies to a “supranational state,” he said…read more on bloomberg