News Release from the CFTC:
Commissioner Bart Chilton Says Obama “Right on Target”
Regulator Ready for Trading in Carbon Markets
Washington, DC - Just weeks before discussions will convene on the trading and regulation of carbon markets in the United States, Commissioner Bart Chilton, chair of the CFTC’s Energy and Environmental Markets Advisory Committee (EEMAC), praised President Obama’s comments today regarding the trading of carbon as a commodity.
“The President is right on target,” said Chilton, “and our agency is standing ready to oversee the trading of derivatives in these critically important markets, to ensure the safety and soundness of all such activity.” Chilton stressed the need to protect consumers, enable businesses to operate more efficiently, and benefit the environment. “The CFTC has a longstanding history of federal regulation of derivatives trading—from monitoring exchange activity to ensuring financial responsibility to carrying out disciplinary and enforcement actions—and we need to get this right. It is too important to our economy, to individuals, and to the world not to.”
Commissioner Chilton noted the agency’s successful oversight of emissions trading relating to sulfur dioxide, and the positive effects those related emissions programs have had on the environment. “You don’t even hear anyone talking about acid rain anymore,” he noted, “and it is my hope and expectation that we can achieve a similar success with other greenhouse gas emissions products.”
Chilton will chair a meeting of the EEMAC on May 13, 2009 in Washington, at which issues relating to carbon emissions trading are expected to be addressed.
The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value,11 times the size of the entire world economy. The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.
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Will private equity grow into a major form of finance in the coming years?
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