Regulators OK New Derivative Products

WASHINGTON (CN) - The SEC and the Commodity Futures Trading Commission on Tuesday approved trading of two new derivative products: futures and options contracts based on shares of the SPDR Gold Trust. The SEC approved trading in options and the CFTC approved trading in futures.

Trading in derivatives, a lightly regulated and less understood financial instrument, has been subject to occasional congressional scrutiny, but lawmakers have done little or nothing to counter administration and Wall Street claims that Congress, which does not understand the products, will only screw things up by trying to regulate them.

The SEC, in announcing the new derivative products, said Tuesday in a press release: "The SEC's and CFTC's approvals are expected to harness the power of market forces in determining the viability of the products and are designed to ensure that appropriate public, market participant, and financial protections are in place. Additionally, the coordinated product approvals are expected to enhance legal and regulatory certainty for users of the new products."

The SEC press release continued: SEC Chairman Christopher Cox said, 'Today's approvals offer America's investors in gold an alternative that may, for many, be a more convenient and cost effective way to manage their risks. Today's approvals also represent a significant step forward for the SEC and the CFTC in our inter-agency cooperation. America's investors deserve a clear and united voice from government regulators on how these products will be treated under the law. Today's coordinated product approvals provide that clarity and consistency.'

"CFTC Acting Chairman Walter Lukken said, 'The actions announced today represent a major victory for the cause of financial innovation and will help promote competition among America's financial markets. With these actions, the CFTC and the SEC have begun a new era of cooperation, guided by the interagency agreement signed in March of this year. I believe that America's markets and market participants can only benefit from such close cooperation between government regulators.'"

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