The top U.S. derivatives regulator on Wednesday named six types of swaps that need to be cleared to protect against default, taking the next step in an effort driven by the economic crisis to make financial markets more resilient.
Clearinghouses must stand between buyers and sellers in four classes of interest rate swaps and two classes of Credit Default Swaps (CDS), the Commodity Futures Trading Commission (CFTC) said, in line with its July proposal.
"Central clearing is one of the three major building blocks of Dodd-Frank swaps market reform ... and this rule completes the clearing building block," CFTC Chairman Gary Gensler said in a statement, referring to the 2010 U.S. law.
In the opaque $650 trillion swaps market, a wide variety of financial contracts change hands in bilateral deals largely out of the sight of regulators. Critics say the sector exacerbated the global financial crisis in 2008.
A U.S. overhaul of Wall Street will bring large parts of the swaps markets to
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