NYSE: Clearing, Reporting Are Key To OTC Derivatives Reform
October 13 2009 - 4:49PM
Dow Jones News
Clearing over-the-counter derivative trades and tightening
reporting requirements are more important than moving swaps onto
listed trading platforms, the head of exchange operator NYSE
Euronext (NYX) said Tuesday.
"It is less important how they are traded than whether they are
centrally cleared and how transparently they are reported," NYSE
Chief Executive Duncan Niederauer told reporters, noting that
guaranteeing trades through clearing and giving regulators more
data will address many concerns raised by the financial crisis.
"I don't know how much more the problem will be solved by
listing them on an exchange," he added. Niederauer is the latest
major voice in the financial industry to downplay the importance of
a major provision in the Obama administration's derivatives
proposal that would force all standard derivative products onto
exchanges or equivalents to help improve price transparency.
Such a provision is noticeably absent from Rep. Barney Frank's
own proposal, which the House Financial Services Committee will
vote on as early as Wednesday.
Instead, Frank's bill only provides incentives to move products
onto regulated platforms. It does mandate the clearing of standard
derivatives like the Obama plan, but provides clearing exemptions
to a broader swath of companies.
Frank signaled in a hearing on his bill last week that he is
leaning against a mandate on exchange trading despite a plea from
the chairman of the U.S. Commodity Futures Trading Commission who
said he thinks the exchange-trading of standard products is an
essential part of the regulatory revamp. The Securities and
Exchange Commission, however, disagreed, saying it too thinks
clearing requirements are far more important.
"I don't think it makes a lot of sense to put all of these
products onto an exchange," Niederauer said. "That should be the
last step, not the first step."
NYSE is not the only major U.S. exchange to voice concerns
against mandating the exchange-trading of derivatives. CME Group
Inc (CME), the world's largest futures exchange, has also warned
against forcing products onto exchanges even though it stands to
gain new business.
Niederauer said Tuesday that his company currently does not
stand to benefit from a bill requiring swaps clearing because NYSE
does not own a clearinghouse.
NYSE is, however, involved in a joint venture with the
Depository Trust & Clearing Corp. to create New York Portfolio
Clearing, which will clear cash Treasurys and other derivatives
products. Officials with the exchange operator have said that the
venture could eventually clear interest-rate products, which
represented more than $400 trillion worth of over-the-counter
business in 2008.
- By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634;
sarah.lynch@dowjones.com.
(Jacob Bunge in Chicago contributed to this article.)