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Regulating 'Wild West' CDS Market

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It seems that the credit default swap market is coming under scrutiny once again.

The Obama administration on Wednesday sketched out a framework for regulating financial derivatives in the United States, which have been blamed for worsening the financial crisis.

The recommendations included subjecting all over-the-counter derivatives dealers to "a robust regime of prudential supervision and regulation, including conservative capital, reporting and margin requirements.

In a letter to Senate Majority Leader Harry Reid, Treasury Secretary Timothy Geithner said the reforms were aimed at preventing derivatives from posing a risk to the financial system, improving transparency, and preventing market manipulation.

Is there a trade here?

I think it’s good for exchanges but bearish for big broker dealers such as Goldman and Morgan , muses Tim Seymour.

I’m also bullish on exchanges, adds Sandler O'Neill exchange analyst Rich Repetto. Considering they're already clearing similar products, the CME and ICE are probably the front runners for winning these contracts.


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Trader disclosure: On May 13th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (F), (WFC), (HRS), (TGT), (WFC), (SKF), (SDS); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Seymour Owns (AAPL), (BAC), (BX), (EEM), (FXI), (PBR), (TSL), (TSO); Seymour Is Short (NUE); Cortes Owns The Yen; Cortes Owns (GS)

For Repetto:
Sandler O'Neill Expects To Seek Compensation From (AMTD)
Sandler O'Neill Acts As A Market Maker In Securities Of (AMTD)
Sandler O'Neill Expects To Seek Compensation From (CME)
Sandler O'Neill Expects To Seek Compensation From (ETFC)
Sandler O'Neill Expects To Seek Compensation From (ICE)
Sandler O'Neill Expects To Seek Compensation From (NDAQ)

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