In testimony before the Senate Committee on Agriculture, Nutrition and Forestry on June 4, Gary Gensler, Chairman of the Commodity Futures Trading Commission, called for expanded regulatory authority and oversight with respect to over-the-counter (OTC) derivatives markets. Chairman Gensler proposed the implementation of a two-pronged regulatory regime, with enhanced regulatory oversight over both derivatives dealers and the derivatives markets themselves.
With respect to derivatives dealers, the proposed regulatory structure would require uniform registration of all dealers and would subject them to capital requirements, initial margining requirements, business conduct rules and recordkeeping and reporting requirements (including public reporting of aggregate position and trade information). To enhance direct oversight over derivatives markets, Chairman Gensler’s proposal would require standardized OTC derivatives contracts to be cleared through central clearinghouses and traded on exchanges and/or transparent electronic trading facilities. With respect to customized derivative instruments that cannot be cleared or traded on an exchange, regulators would nonetheless be granted antifraud and anti-manipulation authority over such instruments, as well as the power to impose margin, recordkeeping and reporting requirements. Chairman Gensler also recommended that the CFTC be given broad authority to implement position limits, including aggregate position limits, across markets.
A copy of Chairman Gensler’s testimony is available here