The Obama administration today announced a huge expansion of the regulation of derivatives, saying it wants to regulate all over-the-counter derivatives trading.
The administration claims that the current economic crisis exposed the risk inherent in OTC markets.
The new regulatory plan was presented by heads of the US Department of Treasury, the Securities and Exchange Commission and the Commodity Futures Trading Commission. It will be formally submitted to Congress later this week.
Under the plan, OTC clearinghouses would be responsible for enforcing margin requirements and make public aggregate position data. The exchanges also would be required to provide US regulators with data on individual trader positions, although this data wouldn’t be released to the public.
The regulation is meant to bring government supervision and transparency to the credit default swap market. But it’s reach is far broader. The regulations would cover all OTC derivative trades, including energy products.
“The lack of regulatory authority in this market contributed to the current economic crisis,” Treasury Secretary Timothy Geithner said.