Risk Council Seeks Comments On 'Systemically Significant' Clearinghouses

Top U.S. regulators Tuesday took an initial step to more closely regulate clearinghouses and other financial utilities that could pose broader risk to the economy if they fail.

"I think it's very important that as we go forward we address the increasingly interconnected payment clearing and settlement system and further our attempts to mitigate systemic risk," U.S. Securities and Exchange Commission Chairman Mary Schapiro said at the second meeting of the Financial Stability Oversight Council.

The council approved an advanced notice of proposed rulemaking that seeks public comment on draft regulations affecting financial market utilities--systems for transferring, clearing, or settling transactions among financial institutions.

The Dodd-Frank financial overhaul law requires the heightened oversight.

At its first meeting, the oversight council sought comment on regulations affecting firms that are so large, complex or interconnected that their failure could destabilize the entire financial system, spurring thousands of submissions as regulators shape the new rule. Many businesses and business groups have urged the council to move cautiously.

Financial market utilities, a designation that includes clearinghouses, are next on the list. Clearinghouses stand in between two parties to guarantee trades and protect against potential default.

Under the law, any clearinghouse that is dubbed "systemically significant" by the council could potentially gain access to some of the Federal Reserve's loans, including the discount window.

-By Jeffrey Sparshott and Sarah N. Lynch; Dow Jones Newswires; 202-862-9291; jeffrey.sparshott@dowjones.com

CME (NASDAQ:CME)
Historical Stock Chart
From Sep 2024 to Oct 2024