The Obama administration scored its first financial regulation reform victory in months on Thursday when a U.S. congressional committee approved new regulations for over-the-counter derivatives.

In a 43-26 decision, the House of Representatives Financial Services Committee voted in favor of slapping new rules on the largely unpoliced $450-trillion OTC derivatives market, widely blamed for amplifying last year's financial crisis.

The committee's bill tries to strike a balance between curbing the kind of speculative market excess that led to last year's AIG disaster, and preserving its useful role in helping corporations hedge against operational risks.

That effort, which meant watering down parts of an earlier administration proposal, got mixed reviews.

It does not do enough to protect taxpayers and our economy, said Heather Booth, director of Americans for Financial Reform, a consumer advocacy group.

Unregulated derivatives trading was a major cause of the economic crisis ... But the big Wall Street firms who make tens of billions of dollars from these trades -- and then left the taxpayers to clean up their mess -- want to continue with business as usual, Booth said in a statement.

But Commodity Futures Trading Commission Chairman Gary Gensler called the committee's action a significant step and added he wants to work with lawmakers toward legislation that covers the entire marketplace without exception.

The vote showed the Obama administration's financial regulation reform drive gaining headway on Capitol Hill.

It follows months of drift and closed-door negotiations with bankers and Republicans who are fighting to protect profit margins from the Democrats' drive for tougher rules.

The administration is under international pressure to advance its financial reform agenda, with European Union and member-nation regulators moving ahead on their own changes.

Thursday's vote was an incremental step in the reform of OTC derivatives -- financial contracts that trade off-exchange among the biggest financial institutions and end-users ranging from airlines to agribusiness.

The House Agriculture Committee must still vote, likely next week, on its own, somewhat tougher version of OTC derivatives reform.

A full House vote on financial reform is expected next month. Leaders hope to bring one bill to the floor covering OTC derivatives, a financial consumer watchdog agency, bank supervision, systemic risk regulation, hedge fund oversight and new powers for dealing with failing financial firms.

Parallel OTC derivatives legislation has been filed in the Senate, but financial reform is moving very slowly there.

We're still working on our package. We haven't gotten into concrete details in the Senate, Senator Richard Shelby, the top Republican on the Senate Banking Committee, told CNBC television on Thursday. It's a long way from being law.

GLOBAL PRESSURE

Obama in May signed into law hard-hitting new rules for the credit card industry. The House has approved bills to put new curbs on executive pay and to reshape the student loan market, but the Senate has not yet acted on those two initiatives.

The financial services committee was set to vote next week on setting up a proposed Consumer Financial Protection Agency

A dozen other proposed financial reform bills sent to Congress by Obama have been under debate for months. The House has a schedule for dealing with them, but not the Senate, which has been consumed for much of 2009 with healthcare reform.

The G20 group of countries agreed in September that OTC derivatives should trade on an exchange or platform, where appropriate, and be centrally cleared by the end of 2012.

The EU's executive European Commission is due to come out with its own policy thinking on regulating OTC derivatives in the 27-nation bloc next Tuesday.

Obama earlier this year proposed moving much of the trading of OTC derivatives onto exchanges or equivalent electronic platforms to encourage transparency and accountability in a market considered opaque and beyond the grasp of regulators.

OTC derivatives are financial contracts that trade off-exchange among the biggest financial institutions and end-users that range from airlines to agribusinesses.

Goldman Sachs , JPMorgan Chase , Citigroup , Bank of America and Morgan Stanley dominate the derivatives market and reap huge profits from it.

A large slice of the market involves financial firms placing bets on changes in interest rates, debt defaults and prices for commodities or stocks. But many businesses use derivatives to hedge against risks that can affect their operations, such as changes in fuel and commodity prices.

(Reporting by Kevin Drawbaugh, Charles Abbott and Karey Wutkowski, with Huw Jones in London; Editing by Andrew Hay)