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CFTC, SEC eye clearinghouses governance – Gensler (Reuters)
WASHINGTON (Reuters) –
Congress should give U.S. securities and futures regulators the authority to ensure clearinghouses are protected against
, the chairman of the
said on Monday.
U.S. Senate committees
that will include new oversight for over-the-counter derivatives.
or financial stake in particular transactions,” Gensler said in remarks prepared for the Institute of International Bankers.
) and the CFTC should have clear rule-writing authority to oversee and ensure clearinghouse governance to protect against conflicts of interest, promote open and competitive markets and promote the public interest,” Gensler said.
passed in December limits financial firms to 20 percent ownership stakes in clearinghouses for OTC derivatives to avoid conflicts of interest.
has said it will look at clearinghouse ownership and governance as part of its financial regulatory reform bill.
, which has jurisdiction over the CFTC, is also working on a bipartisan bill to grant new oversight for OTC derivatives.
Like the House bill, the Senate bills are expected to require clearing for OTC derivatives.
“As clearinghouses have an important say in which contracts are subject to a clearing requirement, it is essential that we remove potential conflicts of interest from that process,” Gensler said.
Gensler, a former Treasury official in the Clinton administration, has backed getting as many OTC transactions as possible to go through clearing and trade on exchanges.
Clearinghouses should be required to take on trades from any regulated exchange or swap execution facility, Gensler said.
Clearinghouses take on the risk between two parties in case either side fails to meet its obligations. They require derivatives dealers to post collateral in case one party fails in order to prevent additional problems throughout the financial system.
“Currently, over-the-counter derivatives transactions stay on the books of the dealers that arrange them, often for many years after they are executed,” Gensler said.