UPDATE:US House Ag Committee To Vote On Derivatives Bill Thursday
February 11 2009 - 6:53PM
Dow Jones News
The House Agriculture Committee will meet Thursday to vote on a
controversial proposal to reform derivatives regulation.
This latest version, which was drafted and introduced Wednesday
by Chairman Collin Peterson, D-Minn., would give the Commodity
Futures Trading Commission criminal authority for the first time in
its history and also empower the agency to suspend the trading of
credit-default swaps with the concurrence of the President.
It also would preclude the Federal Reserve from establishing
regulations for over-the-counter derivatives clearing - a move that
could put a cramp in IntercontinentalExchange Inc.'s (ICE) plans to
form a credit-default swap clearing platform under the watchful eye
of the Fed. Under the current language in the bill, ICE would be
required to register its clearinghouse with either the CFTC or the
Securities and Exchange Commission.
The bill's language has evolved drastically since last year,
when it hit the floor of the U.S. House. At that time, the bill
focused mostly on reining in excessive speculation in the
agricultural and energy commodities and improving the CFTC's
ability to obtain trading data on commodity index funds. The bill
passed the House in September with a veto-proof majority, but never
became law.
Since then Peterson has added provisions that aim to improve
transparency in the over-the-counter markets. A version debated at
hearings last week, for instance, required mandated clearing for
most over-the-counter derivatives and contained a controversial
proposal to ban so-called "naked" credit-default swaps in which
investors do not own the underlying bonds.
The proposed ban is not in the version Peterson introduced
Wednesday, but the bill still contains provisions to mandate
clearing for over-the-counter products unless otherwise exempted.
The bill would allow for an alternative to clearing as long as the
clearing parties can demonstrate their financial integrity and they
can fulfill net capital requirements imposed by the CFTC.
The bill also still contains provisions for reining in excessive
speculation.
The committee is slated to review the bill Thursday at 1
p.m.
-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634;
sarah.lynch@dowjones.com