Just what has gotten into the CFTC these days? In the last few weeks, Chairman Brooksley Born has made noises that she wants her agency to revisit the regulatory exemption the agency gave the swap market in 1989. That suggestion struck fear into the hearts of derivatives attorneys worldwide because it threatened to reopen a regulatory border skirmish they thought was finally resolved a decade ago.
The news came as no surprise to Susan Ervin, the former chief counsel of the CFTC's Division of Trading and Markets, who recently left the agency to join Dechert Price & Rhoads, a Washington law firm. Ervin was one of the people who helped the CFTC to address the over-the-counter marketplace in the mid-1980s and helped draft the agency's 1989 policy statement on swaps.
"There's always been some ambivalence about the resemblance of derivatives to conventional futures,” she explains, "but that's been coupled with the recognition that it probably is a not a good idea to throttle the OTC marketplace. This marketplace does not seem to have created the type of widespread customer protection concerns or any other problems of the sort that provide the traditional basis for regulation.”
At Dechert, she will become the firm's principal derivatives expert and will lead efforts to build the firm's practice with investment funds, particularly with international clients. "The funds are important incubators of new products,” she says. "The offshore marketplace in particular is developing a number of new niche products geared to specific market sectors and to specialized audiences.”
Despite the move, Ervin is leaving with warm feelings for the CFTC, which she served for nearly 15 years. "It's an interesting and difficult agency that seems to face a perennial identity crisis,” she says. "It doesn't have the advantage of a long history and style like the SEC. It had its share of youthful growing pains and perhaps more than its share of changes in leadership and regulatory philosophy. These factors and the challenge of regulating a sometimes unruly marketplace make the CFTC an exciting place at which to work.”
Burchett's New Checkbook
It's not every day that somebody writes you a check to start a new trading company. But that's what happened to Shannon Burchett, former senior vice president of marketing at Duke Louis Dreyfus, the star-crossed joint venture between Duke Power and Louis Dreyfus Corp.
Shortly after exiting with a golden parachute, he got a call from Ameren Corp., the nation's 10th-largest utility, asking him to help form a new energy trading subsidiary. Burchett jumped at the offer. "A lot of people want to get into this area,” he says. "It's the growth business in derivatives.”
Burchett plans to hire 200 people this year, roughly half in trading and half in marketing. Ameren has built a 23,000 square foot trading floor to house them, and plans to offer what Burchett calls "a full range of risk management products,” including typical fixed-price swaps, on either the financial or physical basis; embedded derivatives in physicals; and various gas and electric options. And as the markets develop, Ameren may explore coal and emissions trading as well.
The key to the booming energy biz is deregulation. "Within the next three or four years, we'll have a totally free market in electricity. Prices are going to trend down, but they will be highly volatile, so people are going to have to do things to mitigate their price risk. That's where we come in.”
Burchett got his start as a foreign exchange manager at Union Carbide, then went on to derivatives-related stints at Bankers Trust, Aetna Finance and Pepsico. He got his first taste of the energy business during the Gulf War era, when he headed derivatives products marketing at Phibro, Salomon's energy subsidiary.
While he acknowledges that Wall Street will play a major role in the developing energy market, he doubts it will dominate. "Until we get to the point where there's active and liquid long-term trading in energy derivatives, it will be difficult for a firm that doesn't have the physical market expertise and the physical assets to be an effective hedger in that business.” He believes the leading players in the market—Enron, Koch, Southern and so on—will remain in the lead for the foreseeable future.
The tough part of building an energy derivatives business in St. Louis, Burchett says, is the relative dearth of local trading talent. "We're importing most of our people from New York and Houston, and, to a lesser extent, Chicago, Cincinnati and Kansas City, where there are other energy trading operations.” How does he lure them to St. Louis? "We're offering an attractive package, and an opportunity to get into the hot area and get their ticket punched. It's a career move, pure and simple. And St. Louis is a pretty nice place.”
(Note to job applicants: Burchett's fax number is: 314-613-9123).
- NationsBank has named Rick Briggs and Dan Caldwell managing director and director, respectively, of its credit derivatives division. Caldwell formerly served as an asset swaps trader at SBC Warburg Dillon Read. Briggs helped build the credit derivatives desk at Toronto Dominion.
- Francois Boisson, formerly head of derivative marketing for Latin America at Paribas, has been named director of Latin American derivatives sales at BankBoston.
- The American Stock Exchange has appointed five new members to its board of directors: Alan Binder, an economics professor at Princeton University; James Packard, the chairman, president and CEO of Regal-Beloit Corp.; Barry Ridings, a managing director at BT Alex Brown; Warren Rudman, a partner at Paul, Weiss, Rifkind, Wharton & Garrison and a former U.S. senator from New Hampshire; and Leslie Tortora, a managing director at Goldman Sachs.
- Saul Stepner, formerly a sales manager at SunGard Capital Markets, has been named sales executive for the Americas at C*ATS.
- Westdeutsche Landesbank has named Elliot Katz assistant director in its global fixed-income division. He had served as a senior options trader at Union Bank of Switzerland.
- ISDA has named its officers and directors for the next year. They include Gay Evans, elected to a fifth-consecutive term as Chairman; Thomas Montag, vice chairman; Charles Smithson, treasurer; Douglas Bongartz-Renaud, secretary; and Richard Grove, executive director and CEO.
- Frank Curran has been promoted to acting president and CEO of the Treasury Management Association. He had served as vice president of government relations and technical services.
- NetRisk has named Nick Barcia and Robert Ceske senior managers in its risk advisory group. Both had served as senior managers at Coopers & Lybrand Consulting.
- Warren Shore has been named senior vice president of market-maker relations at OptiMark Technologies. He previously served as president of First Options of Chicago.
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