In the days to come, Cadwalader will follow developments in regulation closely. Topics that we expect to address will include specific proposals, changes in regulatory staffing, actions with respect to Executive Orders, and the status of regulatory proposals that have not been adopted.

Will an institution that "works with regulators" to test new products be able to keep pace with changes in the market? Consider the difficulty of numerous legal questions that regulators elect not to answer even when their response effectively would be the law, and even when the absence of that response forces firms to take on legal risks. Will regulators truly be prepared to judge when business technology products are ready to be launched? (See also .)

In its analysis, DERA seemed not to differentiate between the use of derivatives for speculation and for hedging. Apparently, DERA assumed that the derivatives would be used only for speculation.

With respect to central clearing, the systemic risk on which regulators have focused is that clearinghouses will fail. However, the greatest risk created by central clearing as mandated by Dodd-Frank is this: in an attempt to save themselves from the risk of failure, clearinghouses could use their ability to demand an unlimited amount of initial margin from clearing member participants and so drain needed liquidity from the financial system. In other words, clearinghouses likely would save…