published: 12.12.03

The Bond Market Association Reaffirms Adoption of Principles and Practices for Wholesale Financial Market Transactions

Date: December 12, 2003
Contact: Jon Teall, 646.637.9279

New York, NY - The Bond Market Association announced today it is reaffirming adoption  of the Principles and Practices for Wholesale Financial Market Transactions, created in 1995 by industry groups under the leadership of the Federal Reserve Bank of New York. The Bond Market Association believes that a clear understanding of the derivatives market is critical to ensuring that the municipal community is best served by the financial tools available. After a full review, the Association's municipal new products committee recommended that the principles and practice document has successfully served the markets over time and will continue to provide a strong framework in the future to educate municipal derivative participants on the role and responsibility of dealer counterparties.

"After carefully considering their applicability to the municipal derivatives market, we determined that the principles and practices accurately reflect the market and are an appropriate guide for municipal counterparties to use to understand the role and responsibility of dealer counterparties," said Ronald A. Stack, managing director and head of public finance, Lehman Brothers, and chairman of the Association's municipal securities division.

The Association further announced the development, with the International Swaps and Derivatives Association, of a major educational initiative on municipal derivatives that is designed to provide market participants with ongoing education in this complex and growing area.

"We regard the ongoing education of the municipal derivatives market as crucial to the continued and vibrant growth of this market," said Mr. Stack. "We are fully committed to continued educational efforts." The educational initiative will cover several topics, starting with the fundamentals of municipal derivatives contracts. Discussions in this area will focus on what derivatives are, how they work, ways in which they are used, risks they are used to manage, and the risks involved in derivatives themselves.

"Understanding the fundamentals of municipal derivatives is very important, especially given the increased use of derivatives as a means of managing risk," said Mr. Stack. "We hope this educational effort will help foster better understanding of municipal derivatives and play an important role in the ongoing education of those involved in this market."

The Bond Market Association, with offices in New York, Washington, D.C. and London, represents securities firms and banks that underwrite, trade and sell debt securities in the U.S. and globally.