US Treasury Announces Proposed New Regulatory Regime for OTC Derivatives

By: David S. Mitchell, William C. Thum, Mark Fajfar, William J. Breslin

The US Department of the Treasury ("Treasury") has taken another step in the elaboration of a new framework for the regulation of over-the-counter ("OTC") derivatives, which are generally excluded or exempted from regulation under the federal commodities and securities laws currently in effect.  The agencies which would be charged with oversight of the OTC derivatives market – the Commodity Futures Trading Commission and the Securities and Exchange Commission – participated with Treasury in a press conference that accompanied the release of a letter from Treasury Secretary Geithner, dated May 13, 2009, to the Congressional leadership (the "Geithner Letter") setting forth the proposal in broad terms.
The general theme of Treasury's proposal is to reconsider many aspects of the Commodity Futures Modernization Act of 2000, which generally excluded OTC derivatives from most regulation under the Commodity Exchange Act and federal securities laws.  While the Geithner Letter lacks many details, it does describe four major policy goals for the regulation of OTC derivatives.

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