The future of the Fed letter commitments

Dealers, buy-side firms and industry associations have made voluntary commitments to improve aspects of derivatives operations in a series of letters to the Federal Reserve Bank of New York. But how will these commitments evolve as more binding rules to regulate over-the-counter instruments are introduced? By Peter Madigan, with additional reporting by Joel Clark and Mark Pengelly

Derivatives users have got used to looking out for the so-called Fed letters. These regular communications, addressed to the president of the Federal Reserve Bank of New York and copied to other global regulators, have contained a series of industry commitments to improve the functioning of the over-the-counter derivatives market. Since the first letter was sent in response to a mountain of confirmation backlogs in the credit derivatives market in 2005, the scope of the commitments has expanded