The financial overhaul bill, which the Senate cleared Thursday and sent to the president, imposes multiple new regulations on the derivatives market generally and the swaps market in particular. It requires that standardized derivatives contracts be traded on an open exchange, with prices and volumes reported publicly. The contracts must also be cleared through a third party, an intermediary who guarantees that if one party defaults, the investor holding the other side of the trade will still be paid.
Clearinghouses will perform that function by requiring parties in a derivative trade to put up collateral, or margin, to protect against a default. The bill also requires securities firms that trade derivatives to maintain certain levels of capital. Overseeing all this activity is the Commodity Futures Trading Commission (CFTC), in the case of derivatives involving commodities like soybeans, oil or metals, and the SEC for security-based transactions.
Blythe Masters, who oversees global commodities at JPMorgan Chase, said at a conference on Thursday that in many respects the changes “are actually going to be very beneficial for the industry and derivatives market participants.”
“It’s important not to lose sight of the fact most of the best minds in the field have believed for years that there has been the need for reform in the market,” she said. Above is a summary from a Article from The New York Times
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