FROM THE OFFICE OF PUBLIC AFFAIRS November 9, 1999LS-224 RELEASES OVER-THE-COUNTER DERIVATIVES REPORT The President's Working Group on Financial Markets on Tuesday unanimously recommended changes to the Commodities Exchange Act that are designed to create legal certainty in the over-the-counter derivatives markets and reduce systemic risk. "Our new financial system has to be based on old virtues," Treasury Secretary Summers, Chairman of the Working Group, said. "As we worked to clarify the legal framework for OTC derivatives, we were guided by time-tested principles of competition, efficiency and transparency. If enacted, these changes will strengthen the financial system by improving a segment of the market which helps American businesses to hedge and manage risk more effectively and reduces borrowing costs for both individuals and corporations." As members of the President's Working Group on Financial Markets, the Treasury Secretary and the Chairmen of the Securities and Exchange Commission, the Commodities Futures Trading Commission and the Board of Governors of the Federal Reserve System, studied the existing regulatory framework, recent innovations, and the potential for future developments in the over-the-counter derivatives markets. Among the report's recommendations are:
-- This recommendation provides greater legal certainty and removes doubts about enforceability, making the
-- This recommendation promotes innovation, competition, efficiency, liquidity and
-- This recommendation reduces systemic risk by encouraging appropriately regulated clearing for OTC
-- This recommendation helps to create legal certainty and protects retail customers from unfair practices.
-- These recommendations, while technical in nature, enhance legal certainty by clarifying that hybrid Additionally, the Working Group recommends that Congress clarify the CFTC's authority to provide appropriate regulatory relief for exchange-traded derivatives when the CFTC deems such relief to be consistent with the public interest. The report also suggests approaches to other related issues including single stock futures, enhanced reporting authority for unregulated affiliates of broker-dealers, and close-out netting provisions in bankruptcy and bank insolvency law. |
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