All derivatives dealers should meet capital, margin, conduct and record-keeping rules, Commodities Futures Trading Commission Chairman Gary Gensler said in a prepared text on Wednesday.
He also urged bankruptcy law changes to protect against derivatives dealer insolvencies and called for position limits for CFTC-regulated over-the-counter (OTC) derivatives that affect price discovery.
Financial regulatory reform is critical for the health of our economy, Gensler said in testimony prepared for delivery before the Financial Services Committee of the U.S. House of Representatives.
The current financial crisis has taught us that the derivatives trading activities of a single firm can threaten the entire financial system and that all such firms should be subject to robust Federal regulation, he said.
He said imposing capital requirements for derivatives dealers would help prevent the types of systemic risks that AIG created.
Derivatives dealers also should be subject to record keeping and reporting requirements for all of their OTC derivatives positions and transactions.
These requirements should include retaining a complete audit trail and mandated reporting of any trades that are not centrally cleared to a regulated trade repository, he said.