Obama Administration Plans New Regulations for Derivatives

[UpInArms]

Source: Washington Post

The Obama administration will detail this afternoon its plan to regulate the exotic financial contracts that helped fuel the global crisis and crippled some of the biggest names on Wall Street, such as American International Group, sources familiar with the matter said.

The proposal, which will require congressional action, imposes a number of restrictions on the so-called dark markets that trade a broad range of these instruments, known as derivatives, without government oversight.

An announcement is scheduled for 4 p.m. The heads of the Treasury Department, Securities and Exchange Commission and Commodity Futures Trading Commission are likely to jointly unveil the proposal.

The administration is seeking to amend securities law so that most derivatives would have to be traded through central clearinghouses regulated by the SEC and the CFTC.

In turn, the clearinghouses would require traders to maintain enough money in reserve so they could cover losses in any investments gone bad. These so-called margin requirements have been a hotly debated issue between the government and private traders because it curbs their profits.

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/13/AR2009051302393.html?hpid=topnews