The Dodd-Frank law will succeed in bringing clarity to the murky $600 trillion over-the-counter derivatives market in the long run, but experts say it will generate some short-term pain at banks, as many will be forced to make costly software upgrades. As a means to prevent a repeat of September 2008, when the collapse of the OTC derivatives market helped drive the global economy into a ditch, U.S. lawmakers moved to require that derivatives trades be cleared through central clearinghouses. The idea was to stop a sequel to the AIG and Lehman Brothers fiascos, in which neither firm was able to settle its derivatives trades when the credit markets froze more than two years ago. Both episodes subsequently left hordes of counterparties out in the cold.
展开▼
