China ahead of the game yet again
The WSJ is reporting today that while the West and in particular the US has been struggling with the aftermath and disastrous effects of credit default swaps, China has long required banks to disclose financial transactions of credit derivatives in contrast with the over-the-counter trading practice in the US:
On Wednesday, the Obama administration proposed sweeping changes in the way certain derivatives are regulated, in particular by requiring that many trades be processed through a centralized exchange to improve transparency.
Today, U.S. derivatives trade over the counter, meaning informally in deals settled between bankers on the telephone.
China, instead, requires banks to disclose to regulators details of each trade in yuan-denominated derivatives, either by funneling activity onto an exchange or electronically registering the deal afterward. That makes it unique among major economies, according to the International Swaps & Derivatives Association Inc., or ISDA.
China has been learning from Singapore’s mistakes too, but it’s too soon to say how far they’ll be following it through.