US, Britain to work on clearinghouse oversight

September 15, 2009

Gary Gensler, chairman of the Commodity Futures Trading Commission, testifies before the House Financial services committee on Capitol Hill in Washington July 2009, REUTERS/Yuri Gripas WASHINGTON, Sept 15 (Reuters) – The U.S. Commodity Futures Trading Commission and the United Kingdom’s Financial Services Authority said they will cooperate on the cross-border oversight of clearinghouses.

CFTC Chairman Gary Gensler and FSA Chief Executive Hector Sants signed a memorandum of understanding on Monday in Washington. It took effect immediately.

This “is an important step in ensuring the sound oversight of clearing houses providing services in both the United States and the United Kingdom and will help promote market integrity and appropriate customer protection in the global derivatives markets,” according to a statement from the CFTC.

A prominent part of the Obama administration’s regulatory reform proposal is for “standardized” OTC derivatives to go through central clearing. Clearinghouses mutualize risk, set margin requirements and make public the terms of trade.

The agreement comes less than a month after U.S. and U.K. regulators also moved to increase supervision of energy markets.

The CFTC and FSA announced the steps, which include closer auditing and mutual on-site visits of exchange operators, in August to gain a better view of trading in U.S. oil futures on the IntercontinentalExchange’s  London exchange.

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