Senator Blanche Lincoln on Friday unveiled a long-awaited draft bill to regulate the $450 trillion over-the-counter derivatives market, taking a tougher tack against big banks than the Senate Banking Committee or House bills on the issue.

The bill, which would require banks to spin off swaps desks if they are protected by federal deposit insurance or access the Federal Reserve discount window, came on the same day the government leveled a major fraud charge against U.S. swaps dealer Goldman Sachs Group Inc.

This is another example of how risky Wall Street behavior puts our nation's financial system in peril and further illustrates the need for the strong reform that my legislation provides, Lincoln, chairman of the Senate Agriculture Committee, said of the fraud charges filed against Goldman Sachs in a statement provided to Reuters.

Last month Lincoln had outlined what observers predicted would be a lighter approach than other bills proposed by the Senate Banking Committee and passed by the U.S. House. Her committee has jurisdiction over futures markets.

But she surprised the market with a crackdown. Derivatives players were closely watching for the detailed language in the bill to gauge its impact and chances for success.

My legislation reigns in this risky behavior by ending the days of backroom deals, providing 100 percent transparency to the derivatives market, putting an end to 'too big to fail' and preventing future bailouts, Lincoln said.

The U.S. Securities and Exchange Commission charged Goldman Sachs with fraud for trade of a credit derivative that it said cost investors more than $1 billion -- a charge expected to amplify calls for financial reforms.

Goldman Sachs said the charges are unfounded and it would fight them.

Lincoln's bill would require most swaps to trade on regulated exchanges and pass through clearinghouses. The 336-page draft exempts commercial end users from mandatory swap clearing while prohibiting financial entities from opting out.

The draft also bans federal assistance, including federal deposit insurance and access to the Federal Reserve discount window, to swaps entities in connection with their trading in swaps or securities-based swaps. They would be required to spin off their swap desk or lose the support.

It also allows the Commodity Futures Trading Commission, which overseas the futures markets, to impose position limits on swaps that perform or affect a significant price discovery function in the market.

CFTC Commissioner Bart Chilton, who has spoken out in favor of boosting oversight of the financial markets, said the draft provided broader oversight for so-called dark markets and gives us the tools we need to lay the hammer down on wrongdoers, if necessary.

Now it's up to Congress -- work through the process, do it quickly, and get a bill in front of the president for his signature. It's really pretty simple. Failure is not an option, he said.

(Additional reporting by Charles Abbott; Editing by Walter Bagley)