SEC, the CFTC agreed on derivatives oversight

 

Wednesday, Jun 24,2009, 11:48:16 AM   Click:

WASHINGTON_The two agencies responsible for federal financial oversight responsibilities of Congress have said that their expertise can be spread over the instruments responsible for the acceleration of global economic crisis.

The Securities and Exchange Commission, the government's primary surveillance of markets and small Commodity Futures Trading Commission, which oversees _ oversees the trading of oil, gas and other commodities _ fought in the past, regulation on the grass and separated supporters in Congress.

But as legislators recast Crafts nation financial rule and Obama discuss the radical proposal of the administration, both organizations are in agreement about sharing the regulation of the so-called market of derivatives.

SEC Chairman Mary Schapiro proposed what it calls "an approach based on simple principles and the regulation of derivatives at a Senate hearing on Monday.

Credit default swaps and other derivatives of underlying securities _ stocks, bonds, options _ fall under SEC oversight. Primary surveillance for other _ derivatives linked to interest rates, commodities, currencies, energy and metals_ go to the CFTC.

Gary Gensler CFTC Chairman stated that the new regulatory regime will require close coordination between the agency and the SEC.

The two bodies should be clearly and without the authority of oversight to prevent and punish fraud, manipulation and other abuses of market, "Gensler said the Senate Subcommittee on Banking and Securities.


Credit default swaps, a form of insurance against defaults, are traded in an international market, the secret valued at approximately $ 60 billion. The collapse of the swaps being the fall of Wall Street bank Lehman Brothers Holdings Inc, and around the insurance giant American International Group Inc., last fall prompted the Government to support the company with about $ 180 billion .

The value of the over-the-counter derivatives based on an underlying investment or _ such as exchange rates, oil and interest rate futures. The derivative to reduce the risk of loss of the underlying asset. About $ 600 trillion of these contracts are held throughout the world.

The plan involves the administration of a network of clearinghouses to provide transparency to the operations of credit default swaps and other derivatives. Many products, however, continue to be negotiated in private, in a market multitrillion dollars in the world rather than the grants controlled by the government.

At the same time, large investment banks that trade in the over-the-counter derivatives would be subject to requirements to hold capital reserves against the risk and other rules. The plan is similar to legislation proposed by a small group of big banks on Wall Street.

The White House initially floated the idea of merging the SEC and the CFTC under the financial review, but backed off after meeting opposition in Congress. Before it became a securities industry regulator, Schapiro was chairman of the CFTC and the SEC commissioner.