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US House backs reforms to clearing house ownership rules

11 December 2009  |  6077 views  |  0 US flag

US lawmakers have approved a bill that will place a 20% limit on collective bank ownership of derivatives clearing houses, despite fierce opposition from financial industry participants.

The US House voted 228-202 Thursday to incorporate the so-called Lynch Amendment into the forthcoming Wall Street Reform and Consumer Protection Act.

The measure will limit bank stakes in newly-created derivatives clearing and trade platforms to 20%. It will not affect existing bank-backed utilities.

Advocating the amendment on the House floor, republican senator Stephen Lynch said: "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. The big banks would be allowed to own and control the clearinghouse and set the rules for how those derivative deals are handled."

Financial industry lobby groups had mounted strenuous opposition to the reform, saying the amendment would cede control of the over-the-counter clearing business to exchange-owned quasi-monopolies and discourage competition.

The proposal was backed by Nasdaq OMX, which is trying to stake its own claim in the interest-rate swap clearing business with its International Derivatives Clearing Group unit.

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