|By BEN PROTESS|
Federal authorities moved a step closer to overhauling the derivatives market on Wednesday, as regulators proposed tougher standards for the nation's biggest banks.
"Together, these rules are intended to make the financial system safer, and the derivative markets fairer, more efficient, and more transparent,"
Ms. Schapiro and the agency's commissioners voted unanimously, 5-0, to advance the plan. It now enters a 60-day public comment period, after which the S.E.C. and other federal regulators must finalize the rules.
The effort was part of the Dodd-Frank Act, the financial regulatory law passed in response to the financial crisis. The law mandated an overhaul of swaps trading by mandating that many such derivatives contracts go through a regulated clearinghouse that serves as a backstop in case one trading party defaults. Regulators, until recently, had little authority to set any rules for this market.
The vote on Wednesday, Ms. Schapiro said, signaled that the S.E.C. had turned the corner in the derivatives overhaul. The agency has now proposed or adopted nearly the entire "regulatory regime for derivatives."
The S.E.C., which has more Dodd-Frank duties than any other
The rules take aim at one of the great calamities of financial crisis of 2008. In the lead-up to the crisis, banks bought billions of dollars in credit-default swaps as protection on mortgage-backed investments. When the investments soured, the
Under the S.E.C.'s plan, banks and other so-called swaps dealers that arrange derivatives contracts would face a fixed dollar capital threshold. The firms would also set aside a ratio equal to 8 percent of the collateral required for swaps contracts. The rules, Ms. Schapiro said, emphasize that swap dealers must hold liquid assets "readily available in times of crisis."
The rules separately require banks to post margin, or collateral, for riskier swaps that do not go through clearinghouses. The banks would use a complex calculation to collect cash or securities from their trading partners.
"We are considering these rules because a grave financial crisis," he said, adding that the crisis "imposed immense costs on the American economy, with tragic effects on American workers and families."
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|Source:||New York Times Digital|