The U.S. government has unveiled its plan to bring some regulatory oversight, and improved transparency, to the over-the-counter derivatives markets.

The proposals published Wednesday would require clearing of all standardized OTC derivatives through regulated central counterparties, which would impose margin requirements and other risk controls.

As well, all OTC derivatives dealers and firms that create large counterparty exposures would be subject to prudential supervision and regulation, which will include capital requirements, business conduct standards, reporting requirements, and margin requirements.

It would also authorize the Securities and Exchange Commission and the Commodity Futures Trading Commission to impose recordkeeping and reporting requirements, to ensure they have the authority to police fraud, market manipulation, and other market abuses, and give them the authority to set position limits on OTC derivatives that perform a significant price discovery function, among other things.

In response to the proposals, Tim Ryan, president and CEO of the Securities Industry and Financial Markets Association, released a statement saying, “SIFMA welcomes the Administration’s initiative with respect to regulatory reform of OTC derivatives. Our members continue to support efforts to reduce systemic risk, strengthen the infrastructure for derivatives transactions, and improve regulatory transparency. It is important that new regulatory measures preserve the usefulness of derivatives as risk management tools for American businesses and we look forward to working with the Administration to ensure that outcome.”

The NYSE Euronext also issued a statement saing that it supports the effort, calling the initiative “critically important to building investor confidence, ensuring the integrity of the marketplace and fostering more efficient trading of OTC derivatives.”

“We applaud regulators for taking a nuanced view of the CDS clearing landscape and we look forward to an expansion of this dialogue to other global regulators,” it said.

IE