Legal News

SEC proposes caps on trading venue stakes

By (Breaking Legal News)

Federal regulators on Wednesday proposed to cap the stake that banks and other market players can own in exchanges where the complex investments blamed for hastening the financial crisis are traded.

The Securities and Exchange Commission voted to seek public comment on the proposed rules, which are designed to prevent conflicts of interest in the operations of clearinghouses and exchanges for derivatives.

The rules were proposed under the new financial overhaul law enacted this summer. It calls for new oversight of derivatives, traded in an opaque $600 trillion market worldwide.

Under the proposal, firms that trade derivatives wouldn't be able to own more than 20 percent of the clearinghouses, exchanges and other trading venues.

The value of derivatives hinges on an underlying investment or commodity -- such as currency rates, oil futures or interest rates. The derivative is designed to reduce the risk of loss from the underlying asset.

The SEC proposal applies to clearinghouses and exchanges for derivatives based on securities like stocks and bonds. It is similar to one put forward recently by the Commodity Futures Trading Commission, covering clearinghouses and exchanges for other kinds of derivatives.

Full post as published by Breaking Legal News on October 13, 2010 (boomark / email).