Washington Post: House passes bill that could exempt trillions in foreign derivatives trades from US regulation

13 June 2013

The House of Congress passed legislation that would exempt the trading of derivatives from federal oversight if it occurs outside the United States.

Supporters say the exemption is necessary to allow US firms to remain competitive in foreign markets. But opponents say the regulations outside the US tend to be weaker and the exemption would put the broader financial system at risk. Opponents said just its passage by the House could put pressure on regulators to take a more lenient approach in writing rules for oversight of foreign derivatives trading. The White House said in a statement that House passage of the bill “would be premature and disruptive” to the regulators’ ongoing efforts to write the rules.

The Commodity Futures Trading Commission has proposed putting under its supervision all derivatives trading, including trading overseas. But the Securities and Exchange Commission has taken a narrower approach, allowing overseas derivatives trades to escape US regulation if the country in which they occur has a rules system that is roughly equivalent to that of the US. The House bill would require the two agencies to issue a joint rule. And trading in the nine biggest foreign markets for derivatives would be exempt from US regulation.

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