Rep. Barney Frank (D-MA) tried to issue assurances on MSNBC this morning that today’s House Financial Services Committee mark up of a bill regulating derivatives trading will include requirements for an exchange where derivatives are traded openly. Such a firm requirement has not been included in early drafts of the bill.
“Everything they do in the derivative area will be forced onto an exchange,” said Frank, who chairs the committee. “There’ll be amendments adopted today.”
The exchange would work like a stock or oil exchange, and bring more transparency and federal regulation to the over-the-counter derivatives market, which is worth hundreds of trillions of dollars.
“There’ll be no more hidden over-the-counter deals,” Frank said.
Still, not all derivatives deals and futures contracts would have to be be made on an open exchange, Frank said. There would be exceptions for what he called “genuine end users” who use futures and other sorts of derivatives to hedge against volatility in their business. Such players would have to publish information about their derivatives deals, but not make them on an open exchange.
Frank said it would be regulators like the Securities And Exchange Commission and the Commodity Futures Trading Commission who would decide which derivatives deals had to be made on the exchange, and which could simply meet the lesser disclosure-only requirement.
“I don’t think the SEC and the CFTC, the two regulators, are gonna allow people to escape this,” Frank said.
