WASHINGTON - The Commodity Futures Trading Commission and Securities and Exchange Commission need to “toughen up’’ their approach on new regulations for clearing derivatives trades, US Representative Barney Frank said yesterday.
Frank, a Massachusetts Democrat, has been at odds with SEC chairwoman Mary Schapiro and CFTC chairman Gary Gensler over his proposal to require them to determine case-by-case which types of derivatives contracts should be sent through regulated clearinghouses. Gensler has said the plan is burdensome and leaves gaps in oversight. He said industry-affiliated clearinghouses should have initial responsibility to determine what can and should be cleared. Schapiro and Gensler have been working with Congress on rules for the $605 trillion over-the-counter derivatives market. The Obama administration wants to increase transparency by forcing more trades onto exchanges and through clearinghouses, which guarantee the transactions and require dealers and corporate end-users to post collateral and meet margin requirements.
Schapiro and Gensler have asked Congress to require all contracts that are accepted to be cleared and to give them power to impose those requirements on other types of contracts. Customized derivatives transactions that cannot be cleared would be subject to higher capital requirements.
