OTC Derivatives

“The Wall Street reform bill will – for the first time – bring comprehensive regulation to the over-the-counter derivatives marketplace. Derivatives dealers will be subject to robust oversight. Standardized derivatives will be required to trade on open platforms and be submitted for clearing to central counterparties. The Commission looks forward to implementing the Dodd-Frank bill to lower risk, promote transparency and protect the American public.”
                                                                                                                      - CFTC Chairman Gary Gensler

Rule-writing process

As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFTC will write rules to regulate the over-the-counter derivatives marketplace.  The CFTC has identified 30 areas where rules will be necessary.  The public is encouraged to provide input on the rule-writing process.  Information regarding each rule-writing area will be published as it becomes available.

See List of OTC Rulemakings

External Meetings

The CFTC is committed to transparency in the rulemaking process. Information on all meetings that Chairman Gensler and Commission staff have with outside organizations regarding the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act will be made public. The topics of the meetings, attendees, summaries of the meetings and any materials presented to the CFTC can be found here.

See List of External Meetings

Over-the-counter derivatives regulation

The Dodd-Frank Wall Street Reform and Consumer Protection Act brings comprehensive reform to the regulation of over-the-counter derivatives.  These products, which have not previously been regulated in the United States, were at the center of the 2008 financial crisis.  The historic Dodd-Frank bill authorizes the CFTC to:

Regulate Over-the-Counter Derivatives Dealers

• Derivatives dealers will be subject to capital and margin requirements to lower risk in the system. 
• Dealers will be required to meet robust business conduct standards to lower risk and promote market integrity.
• Dealers will be required to meet recordkeeping and reporting requirements so that regulators can police the markets.

Increase Transparency and Improve Pricing in The Derivatives Marketplace

• Instead of trading out of sight of the public, standardized derivatives will be required to be traded on regulated exchanges or swap execution facilities.
• Transparent trading of over-the-counter derivatives will increase competition and bring better pricing to the marketplace.  This will lower costs for businesses and their consumers.

Lower Risk to the American Public

• Standardized derivatives will be moved into central clearinghouses to lower risk in the financial system.
• Clearinghouses act as middlemen between two parties to a transaction and take on the risk that one counterparty defaults on their obligations.
• Clearinghouses have lowered risk in the futures marketplace since the 1890s.  The Dodd-Frank bill will bring this crucial market innovation to the over-the-counter derivatives marketplace.