The volume of options trading surged during the past year, with a record 2.4 billion contracts trading on the country's seven options exchanges this year. Although professional money managers account for a significant percentage of the volume, retail investors also are regularly trading options.
During the second day of hearings before the Securities and Exchange Commission and the Commodity Futures Trading Commission, suggestions from experts in securities law included forming a joint task force. The SEC-CFTC task force would tackle swaps as the commissions begin regulating over-the-counter derivatives as well as other initiatives.
Treasury Secretary Timothy Geithner writes that as leaders from the Group of 20 nations gather this week in London, a main priority must be to strengthen capital standards for financial institutions. Geithner says he explained his views on a global agreement on capital standards in a paper sent to G-20 finance ministers. "The fundamental principle is that capital and other regulatory requirements should be designed to ensure the stability of the system, not just the solvency of individual institutions," Geithner writes.
The Federal Housing Administration has taken a hit as mortgage-related losses mount. The agency's reserves are in danger of dropping to less than what Congress mandates, officials said. The situation is expected to fuel speculation that the FHA might need government aid, although agency officials said they need to report only a shortfall to lawmakers.
In a statement of principles, the Treasury said it wants regulators worldwide to agree by the end of next year on increased capital cushions for financial institutions. The Treasury is also seeking consensus on liquidity rules by the end of next year and for them to be implemented by the end of 2012. The Treasury's statement said the rules need to be "as uniform as possible across countries to better protect the safety and soundness of individual banking firms and the stability of the global financial system and economy."