Late Thursday evening the House of Representatives passed the bipartisan Peterson-Frank amendment to H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, by voice vote.
The amendment establishes a central clearing requirement for participants in the over-the-counter derivatives market while preserving the use of derivatives for end users to hedge price risks associated with their businesses.
"Bringing these unregulated credit derivatives under the central clearing model that has served the regulated futures markets well for decades will increase transparency in the marketplace and reduce the systemic risk that over-the-counter derivatives can pose to
the economy if left unchecked," said House Agriculture Committee Chairman Collin Peterson, D-Minn. "Our amendment will hold swap dealers like big banks accountable to new standards for capital, margin, and business conduct requirements and will benefit end users' ability to continue to effectively hedge their price risk by not submitting them to onerous cash collateral requirements."
A central clearing requirement for swaps transactions between dealers and large market participants that are accepted by a clearinghouse would be established by the amendment. Non-cleared swaps must be reported, with major participants and dealers adhering to strengthened capital and margin requirements.
Amendment language and other Committee legislative action on derivatives can be found on the House Agriculture Committee website at: http://agriculture.house.gov/inside/legislation.html.
The House is expected to complete debate on amendments and final passage of H.R. 4173 Friday.