PWG issues over-the-counter derivatives proposals

17 November 2008

The President's Working Group (PWG) on Financial Markets has unveiled a series of proposals designed to improve the oversight and infrastructure of the over-the-counter (OTC) derivatives market.

In a statement, the group - which is chaired by Treasury secretary Henry Paulson and includes the chairs of the Federal Reserve Board, the Securities and Exchange Commission and the Commodity Futures Trading Commission - said it will work to establish new credit default swap (CDS) central counterparties, some of which will be operational before the end of the year.

The Fed governors, the SEC and the CTFC also signed a memo of understanding that establishes a framework for information sharing between the bodies on issues related to CDS central counterparties.

"A well-regulated and prudently managed CDS central counterparty can provide immediate benefits to the market by reducing the systemic risk associated with counterparty credit exposures," the PWG's statement said.

Going forward, the group established a broad set of policy objectives for the OTC derivatives market, including improving its risk management procedures, strengthening cooperation between regulatory bodies and enhancing the transparency and integrity of the CDS market.

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