It's fair to say the relationship between derivative market participants and regulators closely resembles the relationship between the Harlem Globetrotters and the Washington Generals. You know who is going to win; you know there are going to be some clever ways of getting around the defense; and you know the team from DC will be embarrassed in the end. Already sensing defeat before the currently proposed derivatives legislation has been passed, CFTC chairman Gary Gensler wants the Obama administration to tighten the screws a bit more on the market and stay one step ahead of the loophole exploitation squad.
"The story of market regulation has largely been one of rules being set and then end runs being worked out and ways to avoid the intent of the regulation being discovered," said William F. Hederman, an analyst at Washington Research Group. "Here's an attempt by the regulator to be proactive and an attempt to see those end runs ahead of time and close some of them off."
Who knows- they may close some of them off initially. But, much like the Generals, it's only a matter of time before regulators think they've won only to find their pants around their ankles.