Financial Regulatory Forum

U.S. House ‘concept paper’ has mandatory OTC derivatives clearing

By Reuters Staff
July 29, 2009

WASHINGTON, July 29 (Reuters) – The leaders of the two U.S. House committees overseeing U.S. securities and futures markets agree that over-the-counter derivatives should move onto regulated exchanges and go through clearing in most cases, according to a “concept paper” that will guide bill-drafting.

The concept paper was to be released formally on Thursday by the chairmen of the Financial Services and Agriculture committees, Democrats Barney Frank and Collin Peterson. Reuters obtained a copy of the paper in advance.

Over-the-counter trading in derivatives could continue for instruments that regulators decide are too customized to appear on a market or to be handled by a central clearinghouse, the document said. The committees will consider two options for “naked” credit default swaps — an outright ban on them or heightened oversight of dealers and large funds.

The Financial Services Committee oversees the Securities and Exchange Commission while the Agriculture Committee oversees the Commodity Futures Trading Commission.
(Reporting by Charles Abbott; editing by Julie Vorman)

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