Yesterday, in a speech before the International Quality Productivity Center’s 3rd Carbon Trading Conference, Commodity and Futures Trading Commission (CFTC) Commissioner Bart Chilton called on Congress to regulate the over-the-counter (OTC) derivatives and credit default swaps (CDS) markets, as unregulated trades have “clearly had a negative and contributing impact on our economy in the wake of the sub-prime mortgage fiasco.”

Commissioner Chilton outlined the following steps that should be considered by Congress in creating a regulatory framework for the derivatives markets:  

  • Require OTC reporting and recordkeeping to allow the CFTC to examine trading information which may have impact on regulated markets.
  • Oversee mandatory clearing of OTC CDS transactions and encourage clearing of other OTC products to improve stability of the financial system, “provide needed transparency and address counterparty risk issues.”
  • Provide the CFTC with authority to regulate OTC transactions deemed to be problematic by allowing the CFTC to determine and set position limits and extending CFTC anti-fraud, anti-manipulation and emergency authorities.
  • Appropriate immediate full funding in the amount of $157 million for FY ’09 for additional CFTC staff and resources to allow the CFTC to quickly “address possibly manipulative or fraudulent activity that may affect U.S. financial markets.”  

Commissioner Chilton also addressed topics related to the Obama administration’s initiatives on energy, climate change and carbon trading.