Derivative players form new coalition

Five major players in the financial derivatives world are forming a new Washington advocacy coalition as President Obama and Congress look to overhaul the industry.

The five companies are forming the Wholesale Market Brokers' Association Americas Inc. to press its case as lawmakers debate legislation to regulate the over-the-counter (OTC) derivatives market.

The market is now effectively dark and unregulated despite having a gross value of roughly $20 trillion, according to the administration.

The administration is aiming to regulate all OTC derivatives, or those that are traded now between two parties directly rather than through a public exchange or central clearinghouse. The administration wants to regulate all dealers of derivatives as well as push for all standard derivatives to be cleared and traded on exchanges.

The administration has not fully fleshed out how it will define standardized derivatives apart from those that are customized to such an extent that they cannot be brought onto exchanges. Already, major financial and manufacturing interests that trade derivatives are lobbying heavily on the proposal to preserve the market for customized products.

The five companies are major players in the inter-dealer broker market that facilitates deals. The companies include: BGC Partners; GFI Group; ICAP; Tradition; and Tullett Prebon.

“We look forward to representing the interests of the wholesale broker community in order to preserve and enhance the strengths of our markets,” said Chris Ferreri, chairman of WMBA Americas. “Wherever appropriate, we will assist and work with regulatory bodies and other financial institutions to achieve this objective.”

The association is represented by Patton Boggs.