Futures exchanges from Chicago and New York will be asked to report in early December on their progress in forming clearinghouses to stabilize credit default swaps, a U. S. House of Representatives committee chairman said recently.
The clearinghouses are regarded by U. S. regulators as a way to restore liquidity to the swaps market and bring trading, now conducted in private, into a public forum. Clearinghouses could open by year’s end if regulatory approval is forthcoming.
Agriculture committee chairman Collin Peterson said he planned a Dec. 8 hearing to track progress by the CME Group, of Chicago, and the Intercontinental Exchange (ICE), which plans a clearinghouse in New York.
In Chicago, the clearinghouse would be part of a futures exchange. In New York, it would be part of a bank.
“We’re going to have a committee hearing to hear from them, how they’re coming along,” said Peterson, a Minnesota Democrat.
Peterson also said committee members are to visit European regulators and exchanges during the week of Nov. 30 to discuss swaps regulation. Clearinghouses for credit default swaps are planned in London and Frankfurt.
Four U. S. financial regulators recently signed an agreement to co-operate in development of the centralized clearinghouses. None has been approved yet.
Dur ing a committee hearing, Peterson said the Commodity Futures Trading Commission, the regulator of the futures industry, was the agency best suited to oversee the clearinghouses.
“If we have four people doing this, will it work?” asked Peterson, referring to CFTC, the Treasury, the Federal Reserve System and the Securities and Exchange Commission, which oversees equities. All claim a role in credit default swaps.
“We are committed to establishing a level playing field,” responded Patrick Parkinson of the Federal Reserve.
Separately, the Senate agriculture committee chairman unveiled a bill to require swaps and derivatives to be traded only on federally regulated exchanges and to name the CFTC as the regulator.
Over-the-counter dealing in the instruments would be banned.
“Every swap, every derivative, in the future will have to be traded on a regulated exchange”, said chairman Tom Harkin, Iowa Democrat. “It’s going to restrict a lot of this wild speculation.”