US Treasury calls to move OTC derivatives to clearing house
Tue 26 May 2009
US Treasury calls to move OTC derivatives to clearing house
In a letter to the US Senate, US Treasury Secretary Tim Geithner has called for all standardised Over-the-Counter (OTC) derivatives to be moved onto regulated exchanges and central counterparty clearers (CCPs) in order to better regulate and reduce systemic default risks in OTC markets.
Geithner suggests that all OTC derivative dealers and other entities whose activities create large exposures to counterparties should be subject to a robust regime of prudential supervision including capital requirements relating to initial margins on counterparty exposures. Geithner cited the need to work with authorities outside the US to promote complementary measures in other jurisdictions. The Department of Treasury letter is available at http://www.financialstability.gov/docs/OTCletter.pdf
In Australia, the SFE’s Exchange for Physical (EFP) mechanism is used by counterparties in the OTC electricity market to switch OTC positions into electricity futures (and exchange traded options) positions. There are over 2,300 standardised electricity products available on the SFE.