The Securities and Exchange Commission wants to speed up the creation of a regulated exchange to trade credit default swaps and, according to a document obtained by Reuters, has told the various exchanges vying for that opportunity that they'll be exempt from certain regulations.
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The SEC's plan is aimed at fast tracking the creation of one or more central counterparties for credit default swaps, which are used to insure against bond default risk.
A central counterparty would give regulators and the public a glimpse into an extremely opaque part of the derivatives market, blamed for contributing to the financial meltdown. It would also help standardize the criteria to evaluate risk exposure and free up collateral.
According to the SEC document, central counterparties or central clearinghouses will be eligible for exemption from registration requirements if they meet certain conditions.
"Those conditions include giving the SEC access to conduct on-site inspections of the central counterparty's books, records, facilities and systems," the SEC document stated. - Donna Block
