“Derivatives risk remains poorly understood”

This was the title of an opinion piece in today’s Financial Times.  I call B.S..  While there may have been some merit (MAY HAVE BEEN) to the claim back in 2007 that swap counterparties didn’t understand the risks of rehypothecation, it defies logic and common sense to think that in 2012 anyone today could reasonably claim they don’t understand the risks of entering into derivatives particularly vis a vis rehypothecation risk.  I’ve said it before and I’ll say it again, if you don’t understand derivatives you shouldn’t be trading them and if you choose not to hire competent counsel to advise you on them, well then double-whammy and caveat emptor. 

I love the way the piece ends with the seriously outmoded and overused Buffet quote calling derivatives financial weapons of mass destruction and then declaring that their legal risks “remain poorly understood.”  I would argue that at no point in history have the legal risks of derivatives been better understood than they are today.  

Ok, well that was a nice little break for me from reading 644 pages of entity definitions rules and while I could go on and on about the above, I’m just going to go back to work now…