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When variation margin attacks: Difference between revisions
When variation margin attacks (view source)
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This was quite a different thing, and it really challenged the regulatory philosophy of financial services regulation. Until now, there had always been an intermediary and a customer, and you always knew who was who: the intermediary was authorised, regulated to provide its services and appropriately capitalised ''to protect the customer'';<ref>And its depositors: also customers.</ref> the customer didn’t need to be regulated as it the intermediary could obviously look after itself. | This was quite a different thing, and it really challenged the regulatory philosophy of financial services regulation. Until now, there had always been an intermediary and a customer, and you always knew who was who: the intermediary was authorised, regulated to provide its services and appropriately capitalised ''to protect the customer'';<ref>And its depositors: also customers.</ref> the customer didn’t need to be regulated as it the intermediary could obviously look after itself. | ||
The evolution of swaps challenged that: now either party could be creditor or debtor. It was hard to know who to regulate. Who needed protecting from whom? Did they ''both'' have to be regulated? Or ''neither''? For the first couple of decades, the regulatory answer was basically “neither”.<ref>Hence widespread allusions to the wild west, [[Locust|locusts]], [[Black swan|black swans]], casino banking, [[financial weapons of mass destruction]] and so on.</ref> | The evolution of swaps challenged that: now either party could be creditor or debtor. It was hard to know who to regulate. Who needed protecting from whom? Did they ''both'' have to be regulated? Or ''neither''? For the first couple of decades, the regulatory answer was basically “neither”.<ref name="fwmd">Hence widespread allusions to the wild west, [[Locust|locusts]], [[Black swan|black swans]], casino banking, [[financial weapons of mass destruction]] and so on.</ref> | ||
==== Intermediaries, redux ==== | ==== Intermediaries, redux ==== | ||