The U.S. House of Representatives has amended the financial regulation bill to stop firms – mainly banks – from holding over 20% in over-the-counter derivatives clearing houses.
The motion was put forward by Democratic Representative Stephen Lynch, explaining that “My amendment would prevent those big banks and firms like AIG from taking over the police station.”
The move has been criticized by clearing firms, with NYSE Euronext calling the amendment uncompetitive. However, in an interview with Bloomberg, Lynch stressed that existing firms “dont have to change their business form to adhere to this amendment.
Lynch defended the move, saying it would increase competition. The reverse may be the case. Two of the biggest clearing houses in the world, ICE and CME Group, are not controlled by banks. ICE has already launched a successful CDS clearing venue, and CME Group will test run its offering on the 15th December.
Rivals will now have to come outside of the duos major rivals. According to NYSE Euronext’s 2009 Q3 report, Goldman Sachs, Morgan Stanley and UBS recently bought a “significant interest” in the firms U.S. futures venue – NYSE Liffe. Although NYSE Liffe recently shelved an attempt to create a CDS clearing venue, it will be unclear whether the new regulation would allow NYSE Euronext another attempt after the sale of its stocks to major banks.
LCH.Clearnet, along with TradeWeb, are majority owned by banks. Both have criticized the amendment, along with a number of trade bodies.
Exchange firm Nasdaq OMX supported the amendment. On January 6, 2009, the International Derivatives Clearing Group, a majority owned, independently operated, subsidiary of NASDAQ OMX launched a clearinghouse for OTC interest rate swaps.