ANALYSIS OF PROPOSEDOVER-THE-COUNTER DERIVATIVES MARKETS ACT OF 2009
(August 17, 2009)The Administration’s Over-the-Counter Derivatives Markets Act of 2009 (“Proposed OTC Act”)effectively addresses the complex regulatory reform issues with respect to OTC derivatives.These reforms are critical to lower risk, promote transparency and protect market integrity.Reform must comprehensively regulate both swap dealers and the markets in which swaps trade.The Proposed OTC Act would implement the following important steps:
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Eliminate exclusions and exemptions from regulation for OTC derivatives and extend theregulatory regimes of the Commodity Exchange Act (“CEA”) and the federal securitieslaws to fully cover OTC swaps in all commodities;
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Require the registration and regulation of swap dealers and major swap participants,including capital, margin and reporting and recordkeeping requirements as well as business conduct, documentation and back office standards;
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Require that standardized swaps be cleared by clearinghouses that are registered with,and regulated by, the CFTC or the SEC;
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Require that standardized swaps be traded either on regulated exchanges or, if trading islimited to commercial and sophisticated traders, on alternative swap execution facilities(“ASEFs”), which are regulated, transparent electronic trade execution systems;
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Require that information on standardized swaps traded on exchanges or ASEFs be made public in a timely manner, including price, trading volume and other trade information;
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Apply the CFTC’s and SEC’s enforcement authority to OTC derivatives and those whotrade them;
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Establish a comprehensive reporting and recordkeeping regime for swaps, including swaprepositories and a large trader reporting system for the collection of data regarding swaps;
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Require public disclosure of aggregate data on swap trading volumes and positions;
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Give the CFTC and SEC authority to set aggregate position limits across markets;
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Impose conflict-of-interest requirements on trading firms to keep research and analysisappropriately separated from the trading function;
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Enhance Core Principles for all derivatives clearing organizations to be in alignment withinternational standards; and
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