Who should regulate OTC derivatives?

Author: | Published: 1 Sep 2009

Kyle Siskey
Americas staff writer

Over the past year, US politicians have requested a way to regulate credit default swaps and last month President Barack Obama delivered.

The 115-page Obama proposal uses the Commodities Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) to regulate the derivatives market, including credit default swaps. Obama wants the two regulators to cooperate, but their capacity to work together is strained after years of fighting over credit default swaps.

The CFTC and SEC first appeared before Congress and requested jurisdiction over credit default swaps in 2000. The debate remained unsettled until 2008. After Lehman Brothers' failure was linked to credit default swaps, SEC Chairman Christopher Cox pushed Congress to give the SEC jurisdiction. The CFTC followed with a request of its own, backed by the Senate Agriculture Committee. "There has been...