Yesterday morning, the House Financial Services Committee voted, 43-27, to approve Chairman Barney Frank’s proposed Over-the-Counter Derivatives Market Act of 2009, as amended during the mark up session held Wednesday. Several amendments were adopted to Chairman Frank’s initial draft legislation, including the following:

  • A presumption that swaps accepted for clearing by a derivatives clearing organization (DCO) registered under the Commodity Exchange Act and security-based swaps accepted for clearing by a clearing entity registered under the Securities Exchange Act must be cleared.
  • An independence requirement for DCOs, swap execution facilities, and exchanges, limiting swap dealers’ and major swap participants’ ownership interest and participation on the board of directors.
  • A requirement that cleared transactions between parties which are swap dealers and/or major market participants must be executed on exchanges or swap execution facilities. End-users would not be required to transact on regulated exchanges or facilities.
  • A change to the definition of “major market participant” to include an entity which is not a swap dealer but which has a substantial net position (not including commercial hedges) or which might have a significant adverse effect on its counterparties’ capital.