The U.S. Treasury Department has proposed legislation to provide for comprehensive regulation of the OTC derivatives market. The Over-the-Counter Derivatives Markets Act of 2009 would implement the recommendations regarding OTC derivatives set forth in the Treasury’s June 17 white paper “Financial Regulatory Reform: A New Foundation.” Among other things, the bill would:

  • Require the central clearing and trading of standardized OTC derivatives
  • Impose substantial capital and margin requirements with respect to non-standardized derivatives in order to encourage the move to centrally cleared, standardized instruments
  • Provide for the registration and regulation of “swap dealers” and “major swap participants”
  • Provide the Securities and Exchange Commission and Commodity Futures Trading Commission with authority to deter market manipulation, fraud and other abuse and to set position limits and require large trader reports
  • Tighten the definition of eligible investors that are able to engage in OTC derivatives transactions

The proposed legislative language can be found here.

The Treasury’s press release can be found here.

A Katten Client Advisory that more fully describes the proposed legislation can be found here.