New rules for the largely unpoliced, $450-trillion over-the-counter derivatives market were approved by a key US congressional committee on Thursday in a win for the Obama administration. The House of Representatives Financial Services Committee voted 43-26 largely along party lines in favour of the rules after months of intense lobbying by major banks and corporations to shape legislation proposed by the administration and modified in recent days during House debate.
Committee Chairman Barney Frank tweaked his version of the administration's OTC derivatives bill, seeking a balance between reducing systemic economic risks posed by the market and protecting the hedging value it offers to businesses.
In one change from an earlier version, the committee approved an amendment to require that standardised swaps be traded on an exchange or equivalent electronic platform where deals involve only financial speculation. President Barack Obama has proposed forcing much of the trading of OTC derivatives onto exchanges or equivalent platforms to encourage transparency and accountability in a market that is now opaque and beyond the grasp of regulators.
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