US will regulate swap contracts

Author: | Published: 17 Nov 2008

The credit default swaps market should prepare for more regulation, in the form of standardised contracts, from the US government.

In front of the US House of Representatives' agricultural committee, Erik Sirri, SEC director of the division of trading and markets, recommended a central counterparty (CCP), or clearing house, to regulate the derivative swaps market and implement contract standards.

"A CCP could further reduce risk through uniform margining and other robust risk controls over its exposures to its participants, including specific controls on market-wide concentrations that cannot be implemented effectively when counterpart risk management is decentralised," he said.

Credit term agreements...