In a statement, International Swaps and Derivatives Association CEO Robert Pickel said,  “We are examining the details of the draft legislation being especially mindful of the need to preserve the availability and flexibility of privately negotiated derivatives for American companies.”  Commodity Futures Trading Commission Chairman Gary Gensler in a statement called the legislative proposal “a very important step toward much-needed reform to protect the American people by lowering risk, promoting transparency and protecting market integrity,” adding, ”I believe that all over-the-counter derivatives and dealers should be brought under comprehensive regulation.”

The Treasury’s proposal requires clearing of all standardized OTC derivatives through regulated central counterparties, says all OTC dealers who create exposure to counterparties would be subject to a “robust regime” of regulation, and would amend the Commodity Exchange Act to authorize the CFTC and SEC to set position limits on OTC derivatives that perform a significant price discovery function in futures markets.

 Clearing of OTC derivatives through central counterparties has been floated as a possibility for some time, as has the idea of position limits for OTC derivatives. Industry leaders are applauding the Treasury’s plan so far. In a statement, ISDA CEO Robert Pickel said “This proposal is an important step toward much-needed reform of financial industry regulation.” Will the latest proposal impact your trading? Let us know by leaving a comment below.