Another area of the capital markets is woefully lacking in effective regulatory oversight: over-the-counter derivatives. Within less than three decades, over-the-counter derivatives have become a staggering $500 trillion market, in notional value. This market also has the potential to cause considerable harm. Last year, AIG infamously came crashing down because its lightly regulated Financial Products unit engaged in credit default swaps in the over-the-counter markets without holding sufficient capital to hedge the risks.
