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"There is a pressing need to have a central clearing counterparty for derivatives", Commissioner McCreevy said. “At $600 trillion, the size of derivatives markets today are such that we cannot let this OTC market continue without adequate counter party clearing”, he continued and called for a standardization of derivatives.
McCreevy in particular pointed to the outstanding for credit default swaps which is estimated to $60 trillion dollars. “No one is able to say how these swaps will unwind”, he warned. “The opaqueness of these products leads to nasty surprises when things go wrong”, he said pointing out that regulators have little sight of potential liabilities.
“Regulators need to have a much better view of where the real risks in these instruments lie”, he underlined.
McCreevy wants to have concrete proposals as to how the risks from credit derivatives can be mitigated by the end of this year. A systematic look at derivatives markets is planned in the aftermath of the current turmoil