Congress reinstates CFTC's power to ban CDS gambling
Wed Jul 28, 2010
Controversial naked credit default swaps could be banned under the new law.
In a little-noticed provision, the new financial reform law,
signed by President Barrack Obama last week, contains language
that re-empowers the Commodity Futures Trading Commission to
ban certain credit default swap contracts, reinstating powers
that the Commodity Modernization Act stripped away in
A re-empowered CFTC could halt trading of existing credit
default swaps in order to safeguard the public interest, a
vague standard. It was unclear when the CFTC could exercise
such sweeping powers.
"This ambiguity creates an uncertainty that makes the
instrument very ineffective for hedging," said Ari Bergman,
managing principal of Penso Advisors, which manages systemic
risk for hedge funds...
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