that electronics bring to information flows. currently, deals are struck over telephones, perhaps with the assistance of voice brokers. the data from those trades must be entered into the firms ’ information systems. for some firms, data may even be keyed more than once. electronic systems allow the quick, accurate capture of data. the data can then be used to update risk management information systems rapidly. other benefits may be realized in firms ’ ability to manage their credit limits. a feature of many electronic systems is credit limits that are programmed into the system. this feature narrows the ability of rogue traders to expose firms without the knowledge of risk managers. just as electronic systems can generate data useful in internal risk management, they can also generate data about the market for financial instruments. the rapid growth and widespread acceptance of electronic brokering reportedly has made the pricing process more transparent in the foreign exchange market. dealers no longer have to do a transaction to discover where the market is trading. similar improvements in price transparency could be expected in other products. end - users in these products may also reap benefits if competition among dealers increases and bid - offer spreads narrow. 3. settlement status quo. currently, settling derivatives transactions requires lots of paper and manual labor. counterparties must confirm the details of deals with each other. the confirmation lists the economic features of the transaction as well as many legal terms. isda has developed templates for confirmations that market participants use for many products, but tailor - made confirmations may be necessary for certain products or certain counterparties. in some instances, confirmations are generated electronically, but for a range of products, the process is manual. even electronically generated confirmations often must be manually verified by counterparties. many confirmations are faxed between counterparties. s. w. i. f. t., an interbank messaging system, is used to confirm foreign currency options, forward rate agreements, and cross - currency swaps, but its usefulness is limited because both counterparties must employ the system. electronics thus are not the rule in confirmation processing. not surprisingly, the result has been significant backlogs. active dealers report hundreds of unconfirmed trades. a small but significant share may be outstanding ninety days or more. another feature of settlements in otc derivatives in recent years has been the development of collateral programs. us dealers, in particular, have rapidly expanded their use of collateral to mitigate counterparty credit risks. in these programs, counterparties typically agree that

focus. the very large negative externalities associated with such failures could be realized through a classic domino effect or through contagion effects. as the financial crisis showed, losses in a tail event are likely to be correlated for large firms deeply engaged in trading, structured products, and other capital market instruments, and relying on similar sources of short - term funding. thus, the regulatory framework should aim to reduce the chances of distress or failure at such firms to a greater extent than traditional, microprudential regulation would. moreover, it should explicitly take into account the correlations and inter - dependencies in asset holdings and funding. finally, the regulatory system should aim to offset the perception of too - big - to - fail status, which carries with it the possibility of funding advantages in normal times, and protection of creditors and perhaps even shareholders in highly stressed times. the systemic perspective and consequent aim of protecting financial stability argue for the stronger and broader regulatory measures that have been undertaken in recent years. at the other end of the spectrum are community banks, conventionally defined as those with less than $ 10 billion in assets. the roughly 5, 700 banks in this group constitute 98 percent of insured commercial banks in the united states, but hold just under 20 percent of the aggregate assets of all commercial banks. indeed, 90 percent of community banks are what supervisors classify as “ small ” community banks – those with less than $ 1 billion in assets. while these banks will suffer the fallout from systemic problems, they are unlikely to cause such problems. the regulatory aim, therefore, is about as close as can be to the traditional microprudential bank regulatory aims of protecting the federal dif and limiting the use of insured deposits by restricting the scope of bank activities. it is true that the relative lack of geographic and portfolio diversification in many community banks can make them vulnerable to localized economic problems. but that is just the kind of problem that traditional microprudential regulation has been concerned with addressing. what, then, of the 80 or so u. s. banks that have assets of $ 10 billion or more, but are not among the eight large, complex institutions that have been designated of global systemic importance? obviously they vary enormously in size, from just over $ 10 billion in assets all the way up to very large regional banks with hundreds of billions in assets. they bridge the $ 50 billion threshold for enhanced prudential standards established by dodd - frank. yet, whatever their size