New derivative rules to be drawn up by CFTC

19 July 2010

The decision to introduce wide-reaching reform to the financial services sector by the US Senate will see new regulations drawn up to monitor trades of derivatives, the Commodity Futures Trading Commission (CFTC) has announced.

Gary Gensler, chairman of the CFTC, made the comments following the announcement that Congress had passed the bill of financial reform.

He said: “The Wall Street reform bill passed today is historic and comprehensive. Over-the-counter derivatives dealers will – for the first time – be subject to robust oversight for their derivatives activities.

“Standardized derivatives will be required to trade on open platforms and be submitted for clearing to central counterparties. This will greatly improve transparency and lower risk in the marketplace.”

According to the Financial Times, new legislation will apply to clearing houses, traders and dealers in derivatives.

The CFTC is expected to collaborate with the Securities and Exchange Commission on drawing up and implementing many of rules.

Reforms passed by the US Senate include banning proprietary trading among banks and giving the government the power to break up any institution deemed ‘too big to fail’.

By Jim Ottewill

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