Conflicts of Interest in Derivatives Clearing

[Excerpt] The financial crisis implicated the over-the-counter (OTC) derivatives market as a source of systemic risk. In the wake of the crisis, lawmakers sought to reduce systemic risk to the financial system by regulating this market. One of the reforms that Congress introduced in the Dodd-Frank Act (P.L. 111-203) was mandatory clearing of OTC derivatives through clearinghouses, in an effort to remake the OTC market more in the image of the regulated futures exchanges. Clearinghouses require traders to put down cash or liquid assets, called margin, to cover potential losses and prevent any firm from building up a large uncapitalized exposure, as happened in the case of the American International Group (AIG). Clearinghouses thus limit the size of a cleared position based on a firm’s ability to post margin to cover its potential losses. As lawmakers focused on clearing requirements to reduce systemic risk, concerns also arose as to whether the small number of large swaps dealers in existence—mostly the largest banks—might influence clearinghouses or trading platforms in ways that could undermine the efficacy of the approach. Concerns about conflicts of interest in clearing center around whether, if large swap dealers dominate a clearinghouse, they might directly or indirectly restrict access to the clearinghouse; whether they might limit the scope of derivatives products eligible for clearing; or whether they might influence a clearinghouse to lower margin requirements. Trading in OTC derivatives is in fact concentrated around a dozen or so major dealers. The Office of the Comptroller of the Currency (OCC) estimated that, as of the third quarter of 2010, five large commercial banks in the United States represented 96% of the banking industry’s total notional amounts of all derivatives; and those five banks represented 81% of the industry’s net credit exposure to derivatives. The first group of Troubled Asset Relief Program (TARP) recipients included nearly all the large derivatives dealers. As a result of the high degree of market concentration, the failure of a large swaps dealer still has the potential to result in the nullification of tens of billions of dollars worth of contracts, which could pose a systemic threat. A 2009-proposed amendment proposed to H.R. 4173, which passed the House, would have limited ownership interest and governance of the new derivatives clearinghouses by certain large financial institutions and major swap participants. Sections 726 and 765 in the final version of the Dodd-Frank Act mandate that the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC), respectively, must adopt rules to mitigate conflicts of interest. However, it allowed the agencies to decide whether those rules include strict numerical limits on ownership or control. In the CFTC’s proposed rules to mitigate conflicts of interest, published on October 18, 2010, and on January 6, 2011, the CFTC did choose to adopt strict ownership limits, along the lines of the Lynch amendment. The SEC’s proposed rule, published on October 13, 2010, does the same. This report examines how conflicts of interest may arise and analyzes the measures that the CFTC and SEC proposed to address them. It discusses what effect, if any, ownership and control limits may have on derivatives clearing; and whether such limits effectively address the types of conflicts of interest that are of concern to some in the 112th Congress. These rulemakings may interest the 112th Congress as part of its oversight authority for the CFTC and SEC. Trends in clearing and trading derivatives, and the ownership of swap clearinghouses, are discussed in the Appendix

Cyclic AMP modulation of ion transport across frog retinal pigment epithelium. Measurements in the short-circuit state.

In the frog retinal pigment epithelium (RPE), the cellular levels of cyclic AMP (cAMP) were measured in control conditions and after treatment with substances that are known to inhibit phosphodiesterase (PDE) activity (isobutyl-1-methylxanthine, SQ65442) or stimulate adenylate cyclase activity (forskolin). The cAMP levels were elevated by a factor of 5-7 compared with the controls in PDE-treated tissues and by a factor of 18 in forskolin-treated tissues. The exogenous application of cAMP (1 mM), PDE inhibitors (0.5 mM), or forskolin (0.1 mM) all produced similar changes in epithelial electrical parameters, such as transepithelial potential (TEP) and resistance (Rt), as well as changes in active ion transport. Adding 1 mM cAMP to the solution bathing the apical membrane transiently increased the short-circuit current (SCC) and the TEP (apical side positive) and decreased Rt. Microelectrode experiments showed that the elevation in TEP is due mainly to a depolarization of the basal membrane followed by, and perhaps also accompanied by, a smaller hyperpolarization of the apical membrane. The ratio of the apical to the basolateral membrane resistance increased in the presence of cAMP, and this increase, coupled with the decrease in Rt and the basolateral membrane depolarization, is consistent with a conductance increase at the basolateral membrane. Radioactive tracer experiments showed that cAMP increased the active secretion of Na (choroid to retina) and the active absorption of K (retina to choroid). Cyclic AMP also abolished the active absorption of Cl across the RPE. In sum, elevated cellular levels of cAMP affect active and passive transport mechanisms at the apical and basolateral membranes of the bullfrog RPE

A qualitative evaluation of a mentoring reading programme for 9-10 year olds in Northern Ireland

This paper discusses the qualitative evaluation of a mentoring reading programme for 9-10 year olds, which was part of a larger evaluation that used a mixed-methods approach including a Randomised Controlled Trial to determine whether there was evidence of improved outcomes for children participating in the scheme (Miller et al. 2009). The mentoring reading programme started in 1999 with 3 schools and by the time of this evaluation had more than 130 schools involved, with an emphasis on socially deprived areas. The programme consisted of volunteers from businesses in Northern Ireland, who were going one hour a week to schools to read books with children with the aim of improving the children’s reading skills and develop their enjoyment of reading. Each volunteer mentored two children for 30 minutes weekly, and stayed with the same children for the duration of the programme. This type of support scheme is perceived as very timely because the need to improve the children’s opportunities, particularly in socially deprived areas, where conditions are in part exacerbated due to recent historical events

Effects of different footwear on landing forces from a grand jeté in trained dancers

The Grand Jete movement is a popular leap elevation movement used in ballet, modern, contemporary and jazz dance. The move involves taking off from one foot and landing on the other foot reaching the highest point possible in the air and lifting legs to a split position. Dancers may perform many grand jetes in a single routine. The aim of this study was to investigate whether footwear used by dancers can reduce the vertical impact forces caused by landing from high leaps. The study was approved by the university’s ethics committee and informed consent was given by ten highly-trained dancers (age mean 23.1, s=1.6 years; height 1.64, s=.08 m; mass 57.7, s=5.2 kg). The participants all performed a grand jete in three different footwear conditions: bare feet, jazz shoes and dance trainers with shock absorbing properties. Landing forces were recorded using a Kistler force plate sampling at 1000 Hz. Peak impact force was determined as the maximum vertical force occurring during the first 0.07 s of contact. Statistical analysis consisted of repeated measures ANOVA. Maximumforce during the landing phase decreased from 4.00 BW (s=0.72) in the barefoot condition to 3.95 BW (s=0.69) in the jazz shoes condition and 3.58 BW (s=0.68) in the trainers condition (F2,9=2.5, P=0.108, Z2=0.22, power=0.44).Higher impact peak and loading rate values were found in the barefoot condition compared to the shodconditions, with the trainers showing the lowest values. However, there were no significant differences between the footwear conditions for impact peak force(F2,9=0.50, P¼0.616, Z2=0.05, power=0.12),time-to-peak impact force (F2,9=0.44 , P=0.653, Z2=0.05, power=0.11), or loading rate to the poin of maximum vertical force (F2,9=0.53, P=0.597, Z2=0.06, power=0.12). The results showed lower maximum landing forces, impact peak force and loading rates in the dance trainers compared to the barefoot and jazz shoes conditions. Although the values were not significantly different, the small difference between footwear conditions may prove important with the onset of fatigue during a routine. Dancers should train to develop safe landing techniques when performing barefooted

The relative importance of prebiotic synthesis on the Earth and input from comets and meteorites

The prebiotic synthesis of hydrogen cyanide and formaldehyde was studied by the action of electric discharges on various model primitive atmospheres containing CH4, CO, and CO2. Photochemical production rates would also have been important and were calculated for HCN and H2CO. A reasonable rate of synthesis of amino acids from these sources is about 10 n moles/(sq cm yr) or 0.10 moles/sq cm in 10(exp 7) yrs. This would give a concentration of 3 x 10(exp -4) M in an ocean of the present size (300 liters/sq cm). The amino acids cannot accumulate over a longer period because the entire ocean passes through the 350 C submarine vents in 10(exp 7) yrs, which decomposes all the organic compounds. A number of workers have calculated the influx of comets and meteorites on the primitive earth, both as a destructive process for organic compounds and for any life that was present, as well as a source of organic compounds. Some of the amino acids from the meteorite proposed to have hit the earth 65 x 10(exp 6) yrs ago were detected at the Cretaceous/Tertiary boundary sediments. The problem with proposing a large scale input of organic compounds from meteorites and comets is that they must survive passage through the atmosphere and impact. There are some processes that would allow survival such as showers of centimeter to meter sized meteorites and various aerodynamic braking processes for larger objects. Even if a significant amount of the organic material survived impact, the destructive processes in the hydrothermal vents would remove these compounds on the average in 10(exp 7) yrs or less. If it is assumed that the input rate was sufficient to overcome these destructive processes, then too much carbon and water, especially from comets, would have been added to the surface of the earth. It was concluded that while some organic material was added to the earth from comets and meteorites, the amount available from these sources at a given time was only a few percent of that from earth based syntheses

The Angular Momenta of Neutron Stars and Black Holes as a Window on Supernovae

It is now clear that a subset of supernovae display evidence for jets and are observed as gamma-ray bursts. The angular momentum distribution of massive stellar endpoints provides a rare means of constraining the nature of the central engine in core-collapse explosions. Unlike supermassive black holes, the spin of stellar-mass black holes in X-ray binary systems is little affected by accretion, and accurately reflects the spin set at birth. A modest number of stellar-mass black hole angular momenta have now been measured using two independent X-ray spectroscopic techniques. In contrast, rotation-powered pulsars spin-down over time, via magnetic braking, but a modest number of natal spin periods have now been estimated. For both canonical and extreme neutron star parameters, statistical tests strongly suggest that the angular momentum distributions of black holes and neutron stars are markedly different. Within the context of prevalent models for core-collapse supernovae, the angular momentum distributions are consistent with black holes typically being produced in GRB-like supernovae with jets, and with neutron stars typically being produced in supernovae with too little angular momentum to produce jets via magnetohydrodynamic processes. It is possible that neutron stars are imbued with high spin initially, and rapidly spun-down shortly after the supernova event, but the available mechanisms may be inconsistent with some observed pulsar properties.Comment: ApJ Letters, accepte

Metal cooldown, flow instability, and heat transfer in two-phase hydrogen flow

Studies of the properties of five metals with varying tube-wall thickness, with or without and internal coating of trifluorochloroethylene polymer, show that wall characteristics influence flow stability, affect heat transfer coefficients, and influence the transition point from dry- to wet-wall flow