UPDATE: U.S. House Passes Limit On Banks' Stakes In Clearinghouses
11 Dicembre 2009 - 4:44AM
Dow Jones News
Despite fierce opposition from the financial industry, the U.S.
House voted 228-202 Thursday to include a controversial proposal to
limit big banks' controlling stakes in clearinghouses into a
broader financial bill.
The measure, drafted by Rep. Stephen Lynch (D., Mass.) and
backed by Nasdaq OMX (NDAQ), would prevent banks and major swap
traders from collectively owning more than a 20% voting stake in
swaps clearing and trading platforms.
Speaking on the House floor, Rep. Lynch said his proposal will
close a gap in the existing derivatives section of the bill.
"The bill would allow these same big banks to purchase the
clearinghouses that are being created to police the big banks in
their derivatives trading," Lynch said on the House floor Thursday
evening. "The big banks would be allowed to own and control the
clearinghouse and set the rules for how those derivative deals are
handled."
Opponents of the measure have argued that those taking risk in
the swaps market ought to have a say in how clearinghouses are
run.
They also believe the plan could represent a major threat to
LCH.Clearnet, the dominant clearinghouse in the estimated $420
trillion interest rate swap market and NYSE Euronext (NYX), which
is looking to break into interest-rate swap business. LCH.Clearnet
is 83% owned by users, including big banks--well above the 20%
threshold in the Lynch proposal.
Nasdaq is trying to stake its own claim in the interest-rate
swap clearing business with its International Derivatives Clearing
Group unit. LCH.Clearnet and NYSE, which have both vocally opposed
the Lynch plan, are Nasdaq's competitors.
"I know that there is one group that supports it," said Rep. Tom
Price (R, Georgia). But he said numerous other groups oppose it
because "they believe strongly it will decrease the choices
available to the American people."
Industry players still opposed the measure even after Lynch
agreed to tweak the language to protect current clearinghouses from
having to change their ownership structure.
Its inclusion in the bill drew immediate criticism late Thursday
evening.
"This amendment does a disservice to the legislation being
considered today," said Cory Strupp, the managing director for
government affairs at the Securities Industry and Financial Markets
Association.
"This amendment is simply a special interest give-away that
benefits a few at the expense of the entire market."
A final vote on the broader House financial bill is expected
Friday.
-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634;
sarah.lynch@dowjones.com
(Michael R. Crittenden contributed to this article).
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