![Risk.net](https://www.risk.net/sites/default/files/styles/print_logo/public/2018-09/print-logo.png?itok=1TpHrpuP)
US to regulate OTC derivatives
US Treasury secretary reveals plan to supervise over-the-counter derivatives
WASHINGTON, DC - US Treasury secretary Timothy Geithner has this week unveiled plans to regulate the over-the-counter derivatives market in the US.
The move by the Obama administration is in line with steps taken by the European Commission to supervise such trades by forcing them through regulated central counterparties.
The OTC market - estimated to be worth more than $680 trillion - has received bad press throughout the global financial crisis for its opacity, with trades often taking place over the phone, making oversight difficult.
"This is enormously important," said Geithner. "We need better, broader authority, better information, and we need a better commitment of supervisory authorities to enforce those laws."
Channelling 'standardised' OTC derivatives through central clearing houses would reduce the risk of investors being dangerously exposed to a single counterparty in the case of default.
The plan envisages requiring central clearers to produce publicly available data on trading volumes, and to show regulators the trades of individual counterparties.
The new laws could cause increases in bank regulatory capital, as well as providing oversight for a large part of the credit default swap market - products partially blamed for the collapse and federal bail-out of insurance giant AIG.
Geithner said that while "non-standardised" OTC derivatives would remain off the radar under the changes, their popularity had markedly declined recently, and the dealers and firms in those markets with large exposures to them would in any case become subject to tightened regulation.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Banks fret over vendor contracts as Dora deadline looms
Thousands of vendor contracts will need repapering to comply with EU’s new digital resilience rules
EU banks lose relief on model test after FRTB delay
Deferment of new trading book regime to January 2025 eats into transition period for “erratic” P&L attribution test
Sunday night football and the Basel III endgame
Big banks, political advocates and housing organisations are unlikely allies in race to dropkick new capital regime
Futures exchanges seek clarity on China licensing regime
Hazy details on landmark Futures and Derivatives Law breeds legal uncertainty, unnerving operators
Some EU banks wanted option to start FRTB on time
Representatives of member states raised possibility with European Commission at July meeting discussing the delay
For US Treasury troubles, treat the cause not the symptom
Regulatory alarm about hidden risk in the Treasury futures market misses the point, fund association execs write
Iosco delays pre-hedging consultation to November
Review into controversial practice splits industry
Honey, I shrunk the Fed. (Not a sci-fi fantasy)
Promoting the discount window may be the Fed’s key to shrinking its $7trn balance sheet, says Bill Nelson