Justice Department Seeks Tougher Derivatives Rules

By BEN PROTESS
NYT

The Justice Department is wading into the murky world of derivatives regulations – and it does not like what it’s seeing.

Financial regulators in Washington have been churning out potential new policies to bolster competition in the unwieldy market. But the Justice Department’s antitrust division says the proposals could fall short.

The proposals “may not sufficiently protect and promote competition in the industry,” a high-ranking Justice Department lawyer said Dec. 28 in letters to the Commodities Futures Trading Commission and the Securities and Exchange Commission.

The Justice Department’s concerns center on two proposals released by the commissions in October, which aim to curb Wall Street’s influence over the $600 trillion derivatives market.

Banks now hold $234 trillion of the insurance like contracts, which derive their value from another asset, like a foreign exchange rate or a package of mortgages. Four of the nation’s largest financial institutions — JPMorgan Chase, Citigroup, Bank of America and Goldman Sachs — account for more than 90 percent of the banking industry’s activity in derivatives, according to a report released this month by the Office of the Comptroller of the Currency.

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