Over-the-counter derivative markets are heading for their biggest ever regulatory change, as the US government unveiled on May 13 a comprehensive plan to make the market more transparent, safer and much more tightly controlled by regulators.
US Treasury secretary Tim Geithner revealed his plan in a joint press conference with Mary Schapiro, chairman of the Securities and Exchange Commission, and Michael Dunn, acting chairman of the Commodities Futures Trading Commission.
All “standardised” OTC contracts will have to be cleared through central counterparties (CCPs); dealers will be encouraged to trade contracts on exchanges; all OTC trades of any kind will have to be reported to central repositories; and position limits may be imposed.
Geithner said that at the heart of the plan was a desire to increase transparency and regulatory oversight for a market that has been widely blamed, whether fairly or unfairly, for its role in the global financial crisis.