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Yes, the SEC Regulates Derivatives

By Anonymous

Felix Salmon apparently thinks the SEC is "charged with regulating securities but not derivatives." Ezra Klein is quick to offer a me-too post, mocking the SEC for saying "derivatives" when it should have said "securities." Klein says that "[i]t's all the worse because the SEC doesn't have the authority to regulate derivatives, even though that appears to be what some of its employees think the agency is doing."

Oy.

The SEC does, in fact, have the authority to regulate derivatives. It regulates options (e.g., calls, puts, straddles) on individual securities, options on certain indexes of securities, such as the S&P 100, and exchange-traded options on foreign currency. Options are unquestionably derivatives.

What Salmon and Klein probably meant was that the SEC doesn't have the authority to regulate swaps. But swaps aren't the only kinds of derivatives by any means. Confusing swaps and derivatives is what leads idiot journalists to constantly mislabel derivatives as "unregulated financial instruments." (If journalists think derivatives are all unregulated, then I'm curious what they think the Commodity Futures Trading Commission does?)

Full post as published by Economics of Contempt on June 04, 2009 (boomark / email).