The Obama Administration unveiled the final portion of its sweeping financial regulatory reform effort last week, when the Treasury Department released its over-the-counter (OTC) derivatives proposal. The draft legislative proposal – sent to Capitol Hill on August 11 – seeks to bring transparency to the field of OTC derivatives, and to provide regulators with tools to prevent abuses such as manipulation and fraud in such markets.
Specifically, the draft proposal would mandate central clearing of standardized derivatives, require reporting of all derivatives trades to a central location, and support greater standardization by imposing high capital and margin requirements on customized derivatives. Additionally, the Treasury Department seeks a new role for itself by proposing to resolve conflicts between the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The Treasury Department sent its derivatives legislation to the House Financial Services Committee and the Senate Banking, Housing and Urban Affairs Committee, both of which are expected to mark up comprehensive financial regulatory reform legislation this fall. Despite its crowded legislative agenda, congressional leaders maintain the goal of sending a completed bill to the President’s desk by the end of the year.