U.S. House chair eases on OTC derivatives clearing
Reuters, Wednesday January 28 2009
By Charles Abbott
WASHINGTON, Jan 28 (Reuters) - An antispeculation bill being developed by the House Agriculture Committee may not require clearing of all over-the-counter derivatives, chairman Collin Peterson said on Wednesday, taking a step back from his original plan.
Drafting of the bill should be completed this week so the committee could hold hearings over the next two weeks and approve a bill before a mid-February recess, Peterson said.
Early this month, Peterson envisioned a bill that would require all OTC derivatives to be cleared by federally regulated clearinghouses. The Minnesota Democrat said clearinghouses, by setting margin and collateral requirements, would remove risk from the financial system and increase transparency in instruments.
On Wednesday, the chairman said it was less certain whether the bill would require all OTC derivatives to clear. It might let federal regulators decide which instruments would have to be cleared or it could require clearing of a sizable percentage of them.
"I think there is a good part of the standardized market that can be cleared," Peterson told reporters.
By covering all types of OTC derivatives, the House Agriculture Committee bill touches on jurisdiction of the Financial Services Committee and the Energy and Commerce Committee. He said the cross-jurisdictional bill could lead to broad agreement on the federal regulatory framework.
"This is about the principles of what we're trying to do here," said Peterson. He said a "principles-based" system would be more flexible in governing markets than the "rules-based" approach taken by some agencies.
In sketching his bill, Peterson said he hoped for a large and bipartisan group of co-sponsors. Hearings probably would be Feb. 3 and 4 for trade groups and other interested parties and Feb. 10 for federal regulators, with a final round of bill-drafting and a committee vote on Feb. 12 and 13, he said.
Financial industry groups show little support for Peterson's plan, according to one House staff worker.
The language on clearing of OTC derivatives would be added to a revived antispeculation bill that was passed last year by the House but not the Senate.
In its original form, the bill would:
- Require foreign exchanges to adopt reporting standards and position limits that mirror U.S. exchanges.
- Require the Commodity Futures Trading Commission to set position limits on major energy and agricultural futures contracts.
- Limit eligibility for hedge exemptions to bona-fide hedgers.
- Expand CFTC enforcement staff by 100 people.
- Authorize CFTC to impose position limits on look-alike energy and agricultural OTC contracts.
- Revise CFTC reports to better identify holdings by index funds and other passive investors. (Reporting by Charles Abbott; Editing by Gerald E. McCormick) |
