The SEC is digging into how the buy side uses derivatives. This is a logical step for them as the current rules were written well before the market became what it is today. I also suspect that as the swaps market becomes more electronic and central clearing really gets going there will be many opportunities for funds to use these products where they couldn’t before. That all said – the last thing anyone needs right now is more regulations and more uncertainty, which this concept release is likely to bring.
“Mutual funds may be able to use the derivatives market more now that it is more transparent, but it could become a huge regulatory burden unless the rules are clarified,” said Kevin McPartland, director of fixed income at Tabb Group.