14 May 2010

CFTC Gensler underlines need for comprehensive regulatory reform to the OTC derivatives marketplace

It is essential that any regulatory reform comprehensively regulates any entity that deals derivatives, Gensler said, including a regulation for derivative dealers. He also underlined that there should be no exemption from clearing when a contract is transacted between two financial entities.

CFTC Chairman Gary Gensler underlined that the regulatory reform needs to comprehensively regulate any entity that deals derivatives. Also, standardized OTC derivatives must be brought onto transparent and regulated exchanges or similar trading venues, and standardized OTC derivatives have to be brought into central clearinghouses.

 

Financial reform must bring comprehensive regulation to derivatives dealers, Gensler said. Dealers should be required to have sufficient capital and to post collateral on transactions, and they should be required to meet robust standards and should be subject to stringent record-keeping requirements.

 

Gensler called on the Congress to enact robust recordkeeping and reporting requirements for all derivatives transactions. Moreover, the information must become publicly available to allow a regular price finding process of derivatives transactions with the customers.

 

“To best promote public market transparency, regulation should require that standardized over-the-counter derivatives trade on regulated exchanges or similar trading venues”, Gensler said and called for standardized derivatives to be cleared through central clearinghouses.

 

“It is essential that we move as many over-the-counter derivatives transactions into central clearing as possible”, he underlined. “There should be no exemption from clearing when a contract is transacted between two financial entities.”

 

Full speech

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