The Bottom Line: End of the World as We Know It

From the June 2010 edition of AFP Exchange magazine

Dear Readers:

Maybe it was the ties....As currency markets reeled with uncertainty about the British election last month, was I the only person sidetracked by the amazing neckwear of Nick Clegg and David Cameron? Clearly, there is a break with the past in the fashion sense of the resulting UK coalition government, if not the economic policies. Whether or not the new government will be effective, it's a bit too early to say. At any rate, those bright blue and yellow ties, so widely photographed, indicate that change is happening.

Change is in the air with regulators, too.

Amid the upheaval in FX markets last month, some global regulators appeared to be -- dare I say it -- agreeing. Just as the SEC issued new money fund rules, the Committee of European Securities Regulators also redefined money funds to be less risky, though those funds would continue to be permitted to hold FX derivatives (see www.afponline.org/moneyfunds on our site for resources on this issue).

In Canada, after much debate, Finance Minister Jim Flaherty proposed legislation to establish a national securities regulator, bringing the country in line with other major securities markets.

Also on the regulatory front, the U.S. Senate approved derivatives language in May that would give the Secretary of Treasury the option not to have the Commodities Futures Trading Commission (CFTC) regulate foreign exchange swaps and forwards. AFP's legislative analyst says that's good news for AFP members because end users would face lighter regulations and would be exempt from the clearing, margin, and capital requirements of banks, dealers, and major swap participants. As I write, the House and Senate currently are negotiating final language to be sent to President Obama.

Other positive changes are emerging. The volcano with the unpronounceable seems to be settling. BP is perhaps a tiny step closer to stopping the horrendous oil leak in the Gulf of Mexico (let us hope). U.S. Treasury Secretary Geithner has said of volatility in the euro zone, "I'm completely certain that Europe has the ability to manage this."

There's always change.

--Elizabeth Johns

PS. Joseph Farris, the artist who drew this month's iamge, is a contract cartoonist with The New Yorker. Look for more of his artwork in AFP Exchange magazine the future.

See previous 'Bottom Line' columns.