Consistent Returns From Day Trading

Jun 28, 2016, 05:31 AM

The majority of banks place their derivative trades inside subsidiaries. These subsidiaries receive taxpayer backing indirectly via deposit insurance or emergency lending from the Federal Reserve. If bank customers dealt with subsidiaries which did not have Government support, they would be able to negotiate better rates which in turn would be less profit for the banks.

Without the Dodd-Frank Bill in the current climate, banks are looking to sink back into their pre 2008 patterns in order to maintain their high, but very risky, profits.

The bill would permit some types of derivatives which are penned to be pushed-out, to remain inside taxpayer-supported entities. For instance, derivatives for betting on stocks and commodities would get to remain in the safety net. This would also have a knock on affect for regulated Binary Options Brokers.

The push-out rule, say those in favor of the House Bill, could move derivatives trading into unregulated entities. It would also make it more difficult for the Federal Reserve to support the financial system during a crisis and in effect, turn back the system to pre 2008.

With approximately $3 trillion of exposure in the derivatives market, Citigroup is one of the largest swap dealers in the US. Almost $2 trillion of these swaps are based on companies or other entities with a junk credit rating.

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