SIA Submits Comments to the Federal Reserve System on Bank Holding Companies

The Securities Industry Association (SIA)* provides comments to the Board of Governors of the Federal Reserve System regarding the circumstances under which bank holding companies (BHCs) may engage as principal in derivative contracts. SIA supports adoption of the rule that would allow a BHC to invest or trade as principal in a derivatives contract only if: 1) a state member bank is authorized to invest in the underlying commodity; 2) the contract required cash settlement; or 3) the contract allows for assignment, termination, or offset prior to delivery of the underlying commodity. SIA believes under the new Gramm-Leach-Bliley Act standards, the Board should allow FHCs – as either an “incidental” or “complimentary” activity to take possession of physical commodities. SIA also believes FHCs should be able to trade physical commodities on the spot market.

*SIFMA is the product of a merger between the Securities Industry Association (SIA)* and The Bond Market Association (TBMA) in 2006.