Rehypothecation dilemma
Nearly three months on from the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, market participants are still poring over the legislation, trying to make sense of how it will affect them. It’s a huge job – because it carries the weight of law, even a single sentence in the 848-page act can have a dramatic impact.
Such a sentence appears in section 724, which covers swaps, segregation and bankruptcy treatment. The clause simply calls on dealers to notify a counterparty
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