Clearinghouse membership shouldn’t be restricted to derivatives dealers and should be open to non-dealer financial institutions and asset managers, the top U.S. derivatives regulator said today.
The Dodd-Frank financial overhaul, which became law in July, gave the Commodity Futures Trading Commission a year to establish rules governing the $615 trillion over-the-counter derivatives market, including which companies will be categorized as swap dealers or major swap participants. Those are designations that entail higher capital requirements and increased scrutiny.
“What we’ve learned from the futures marketplace is that clearinghouses work well when they are broadly inclusive of many members,” CFTC Chairman Gary Gensler said today in remarks prepared for a speech at a Futures Industry Association conference in Chicago.
The law, named for its primary authors, Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and House Financial Services Chairman Barney Frank, a Massachusetts Democrat, aims to stem systemic risk by requiring most interest-rate, credit-default and other swaps be processed by clearinghouses after being traded on exchanges or swap-execution facilities.
Congress took aim at the industry after soured trades on mortgage and credit derivatives tipped the U.S. economy into the deepest recession since the 1930s.
“Membership criteria should be transparent, objective and nondiscriminatory,” to parties that meet risk management, operational and financial requirements, Gensler said.