Ontario to regulate derivatives market, may relocate to la-la land

Ontario to regulate derivatives market, may relocate to la-la land

A guiding Dwight (Image: dwightduncan.onmpp.ca)

Some of the prime culprits blamed for the crash of the global economy are derivatives traders, those shadowy business folk who invented things like CDOs and CDSs. Governments around the world are now trying to find ways to regulate derivatives and avoid things like the massive recession that those financial wizards brought upon us all. Ontario seems to be trying to get ahead of the pack, with finance minister Dwight Duncan including in his upcoming financial statement some regulation to help tame the $12-trillion Canadian derivatives market.

The Globe reports:

But Ontario is pre-empting similar initiatives already under way on multiple fronts in this country, including one led by the Bank of Canada, to make the largely unregulated domestic market safer and more transparent. Bankers and other regulators expressed surprise that the McGuinty government plans to move unilaterally.

“They are trying to jump the gun a little bit,” said a senior banker. “They are desperate to have this be an Ontario solution.”

A senior government official denied suggestions that Ontario is going it alone. Officials have every intention, he said, of working in concert with the Bank of Canada and other groups, including provincial securities regulators.

Maybe Ontario is throwing a monkey wrench into other provincial plans, or maybe the McGuinty government is simply stepping on the gas a little. Either way, the big question is whether the provinces are even going to be at the table when any of this stuff gets decided. The Bank of Canada is already assumed to be the leading candidate for regulating derivatives (one lawyer working with the government said the provinces “are in la-la land if they think they will take the lead on this,” according to the National Post). Then there’s the Harper government’s long-term project to bring all provincial securities regulation under one national regulator, adding further doubt to whether McGuinty’s plans are long for this world.

Of course, that would require an unelected bunch of people appointed by the prime minister to overrule a democratically elected legislature. And certainly that’s just crazy talk.

• Ontario plans to regulate derivatives markets [Globe and Mail]
• Ontario set to unveil plan to regulate over-the-counter derivatives [National Post]
• Morning Meeting: Battle over derivatives looms [Globe and Mail]