NYSE calls for looser rules on derivatives trading

The SEC must relax its restrictions on broker-dealers to allow US markets to compete for derivatives business, New York Stock Exchange chief economist Paul Bennett told the US Senate yesterday.

Speaking to the Senate's banking subcommittee, Bennett said capital requirements for broker-dealers made business in the US 'less attractive' and were driving brokers to move their derivatives businesses overseas.

SEC requirements to maintain a minimum of $5 billion tentative net capital, and to submit to SEC supervision, are limiting the ability of brokers to calculate their own net capital - a significant regulatory handicap, Bennett said.

He called for the SEC to lower the minimum capital requirement and to move from strategy-based to portfolio-based calculation of margins, to attract more over-the-counter derivatives customers back to US broker-dealers.

NYSE does not have a derivatives market, but Bennett hinted it might develop one. He told the committee: "Investors will increasingly need platforms that can meet all their investment needs, including equities, futures, options or swaps. As the NYSE proceeds with its plans to become a publicly traded company and merge with Archipelago, we are looking to take advantage of the opportunities this new competitive landscape will present."