A draft bill from Barney Frank, chairman of the House of Representatives Financial Services Committee, has proposed that the Securities and Exchange Commission and the Futures Trading Commission (CFTC) should be given the power to prohibit transactions in any swap that would, in the eyes of the regulators, be be detrimental to the stability of a financial market or of participants in a financial market.
The move would allow the CFTC to set trading limits on commodities swaps that take place outside of open exchanges. The SEC could set limits on any security-based swaps.
CFTC Chairman Gary Gensler has been vocal in demanding that more OTC derivatives be centrally cleared. However Franks draft bill has proposed that non-financial companies dealing in OTC derivatives be exempt from centralised clearing, if “one of the counterparties to the swap is not a swap dealer or major market participant.”