The US House Financial Services Committee approved on 15 October legislation that would, for the first time ever, require the comprehensive regulation of the OTC derivatives marketplace. The bill was approved by a vote of 43-26 and represents a key part of a broader effort by US Congress to modernise the US financial regulatory system in response to last year's financial crisis.

Under the bill, all standardised swap transactions between major swap participants would have to be cleared and must be traded on an exchange or electronic platform. A major swap participant is defined as anyone that maintains a substantial net position in swaps, exclusive of hedging for commercial risk, or whose positions creates such significant exposure to others that it requires monitoring.

The legislation sets out parallel regulatory frameworks for the regulation of swap markets, dealers and major swap participants. Rulemaking authority is held jointly by the Commodity Futures Trading Commission (CFTC), which has jurisdiction over swaps, and the SEC, which has jurisdiction over security-based swaps.

The Treasury Department has been given the authority to issue final rules if the CFTC and SEC cannot decide on a joint approach within 180 days. Subsequent interpretations of rules must be agreed to jointly by the two Commissions.