Could A Global Trading “Network Map” Prevent Another Lehman Brothers?
A master "network map" of the world’s securities activity has some serious proponents.
By Janice Fioravante
"We knew right up to the second before Lehman Brothers ceased being, every equity transaction, every order who bought, who sold, down to the trader involved," recalls Ian Donowitz, a managing director of Investment Technology Group. On the other hand, neither the technologically sophisticated and market-savvy ITG nor anyone else including regulators (and maybe Lehman itself) was fully aware of the firms exposure to over-the-counter derivatives, or of other firms OTC derivatives exposure to Lehman.To prevent that kind of blind risk, the Obama administration and some members of Congress are championing a central derivatives clearinghouse to make trading more orderly and transparent. That might help, and Wall Street is already moving in that direction. The catch is that even if a clearinghouse becomes a reality and it has determined opponents many of the most complicated and risky derivatives would still trade over the counter, perpetuating the problem of impossible-to-track risk posed by Lehman.....