Today Congressman Dan Maffei joined a majority of his colleagues on the Financial Services Committee to pass legislation that will overhaul the market for financial derivatives. Today’s bill, which was approved by a vote of 43-26, represents a key part of a broader effort by Congress and President Obama to modernize America’s financial regulatory system in response to last year’s financial crisis.
Under the bill, all standardized swap transactions between dealers and large market participants, referred to as “major swap participants,” would have to be cleared and must be traded on an exchange or electronic platform. A major swap participant is defined as anyone that maintains a substantial net position in swaps, exclusive of hedging for commercial risk, or whose positions creates such significant exposure to others that it requires monitoring. OTC derivatives include swaps, which are contracts that call for an exchange of cash between two counterparties based on an underlying rate, index, credit event or the performance of an asset.
Congressman Dan Maffei said: “The multi-trillion dollar ‘over the counter’ derivatives industry evolved outside of the structure our government had in place for regulating financial services. Watching the economy nearly collapse last year under the stress of financial systems very few people understood, it was abundantly clear that we need to overhaul regulations. Under the leadership of Chairman Frank, we are taking important steps to protect the market and consumers.”
Read more about this legislation at the Financial Services Committee website here and Bloomberg news here
Read Congressman Maffei's Statement for the Record from the Financial Services Committee mark-up
