CFTC trade rules will create 'winner's curse' (Risk.net)

By | February 15, 2011

Dissent for the block trade rule is still rampant.  As the thinking goes, if large swap trades, those that occur in illiquid products that occur weekly or less, are reported within 15 minutes as CFTC proposed rule suggests than the resulting information leakage would cause liquidity (and potentially the market) to dry up completely.  There is a lot of truth to the idea that too much transparency is bad thing – but I’m sure there’s a compromise here that will upset the market participants only a little, and allow the CFTC and SEC to look good from a political perspective:

“The latter is a solution that could well be adopted by the CFTC, predicts Tabb’s McPartland. “The regulatory reform process seems to involve the CFTC coming up with a stringent proposal, having meetings with the industry, then keeping the theme of their proposal but scaling back on the details a bit. So if block trades are larger than 95% of other trades now, maybe when we’ve finished they will be larger than 75% of other trades. There’s room for compromise in there,” he says.”

Read the full article at Risk.net

Have something to say about what I wrote? Please comment...