Congressman Collin Peterson, Chairman of the House Agriculture Committee, and Congressman Barney Frank, Chairman of the House Financial Services Committee, have issued a “concept release” outlining certain agreed principles for the development of legislation to enhance regulation of over-the-counter (OTC) derivatives markets. Principles identified in the concept release include:
- Harmonization of Securities and Exchange Commission and Commodity Futures Trading Commission regulation of OTC derivatives markets, including joint regulation of certain derivative products and the formation of a Financial Services Oversight Council to resolve disputes between the SEC and CFTC as to regulatory authority over new products
- Trade reporting requirements for all OTC derivatives trades
- Mandatory clearing of OTC derivatives by an approved clearinghouse (subject to exceptions for non-standardized contracts and counterparties that are not “major market participants”)
- Adoption of “significantly higher” capital and margin charges for non-standardized OTC contracts that are not exchange-traded or centrally cleared
- Limitations on and/or increased oversight of speculative positions in credit default swaps
- Coordination with foreign regulators to harmonize OTC derivative market regulation, together with authority to restrict access to the U.S. banking system for institutions in countries with lower capital standards than those of the United States.
The concept release is available here