Dear Editor:
The Canadian derivatives market first emerged 46 years ago, with the formation of the Canadian Derivatives Clearing Corporation, which is wholly subsidiary to the Montreal Exchange.
Currently, the majority of derivatives trading is done through "over-the-counter" trades, which are contracts done between two individual businesses.
Beyond over-the-counter trading, derivatives can also be traded on an appropriate exchange, but this becomes subject to various rules created by the exchange. Overthe-counter contracts, on the other hand, are largely unregulated by any federal or provincial industry, and there are no international institutions capable of regulating, even if there was consensus on how to do so.
Currently, the notional value of over the counter derivatives in Canada is $37 trillion. It's a notional value as opposed to a confirmed value due to several factors. First is the nature of derivatives themselves; many derivative contracts involve the future acquisition of a product at current prices, which may not be reflective of the actual value of the product at the time of acquisition.
The other form of derivatives revolves around the loans made by banking institutions to individuals. These loans are often repackaged and traded as derivatives, which effectively means that banking institutions are buying and selling loans, specifically whether the original loan recipient will pay off the loan in the contracted upon time frame.
These derivatives are almost completely unregulated, both here in Canada and across the globe.
The amount of money these derivatives are supposedly worth is almost beyond belief, and yet our government has not done a single thing to even attempt to ensure that the derivatives market enjoys stability or regulates against the kind of meltdown that nearly destroyed the world economy in 2007.
The fact remains that these financial contracts are generally unknown by the public; no one who isn't researching or part of the industry knows much about derivatives.
This government promised to maintain transparency and accountability when it defeated the Liberals in 2006. It has not done so.
Maybe this is a place where some muchneeded transparency could be applied.
Telling the people exactly what it is the financial institutes do with our money, that's the very least they could do.
Trevor Ritchie, Burnaby
