Geithner: Business Hedging Isn't Target - WSJ.com: "Mr. Geithner's testimony Friday didn't shed much new light on details that lawmakers and industry players are clamoring to hear. Specifically, it remains unclear how regulators will determine when a contract is considered standardized. Mr. Geithner conceded the administration isn't ready to carve out a definition, although he promised it would be broad and 'designed to be difficult to evade.'"
Comment:
The question of a definition is indeed KEY.
BICs provide the best framework for providing a robust working definition. See:http://tinyurl.com/cyxhpa
With BICs markets, BICs would be the "standardized derivatives" and everything else would be composed of such BICs. It helps solve hedging ability issues that are matters of concern in this article. In addition, it in effect ensures that economic efficiency forces, in the search for the cheapest production cost, will push derivatives trades where they are cheapest, i.e. in a centrally cleared exchange system.
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