Henry Kaufman, president of Henry Kaufman & Co. Inc., New York, said an increased and better-coordinated oversight of derivatives is needed, given the multitude of regulators fighting to be the regulator of choice.
Speaking at the Institute for International Research Derivatives Summit, held in Boca Raton, Fla., in October, Mr. Kaufman said that while he was not in favor of the derivatives regulations proposed in Congress this year, he does see a need for stronger coordination among existing regulatory agencies in the United States as well as in other countries around the world.
Wendy Gramm, former chairman of the Commodities Futures Trading Commission, and a co-speaker at the conference, said she disagreed that any additional regulation was needed, given added regulation is unlikely to be able to keep up with changes in the market.
In addition, Mr. Kaufman said it is an "open question" as to how well derivatives users' computer risk management systems will work in the face of unusual market developments.
Mr. Kaufman said the market is "as yet untested by any number of difficult scenarios, most importantly, a period of extreme monetary stringency."
Moreover, he said the derivatives markets have made it more difficult for the central banks to implement monetary policy, leading to more extreme tightening and loosening of the money supply.