Sen. Charles Schumer (D-NY) said he is drafting legislation that would require the reporting of over-the-counter (OTC) derivative trades — including energy transactions — to a central trade repository, making it easier for regulators to keep closer tabs on the market.

The central trade repository proposed by Schumer would collect information gathered by the clearinghouses, as well as trade information for uncleared OTC derivatives transactions, providing regulators a tool to monitor systemic risk. In addition, aggregate trade information would be made publicly available on a periodic basis to provide greater market clarity.

“Creating one central warehouse to collect information about all derivative trades would allow us to monitor the effect of these markets on systemic risk. President Obama has called for regulating this sector by moving standardized derivatives to clearinghouses. Consolidating the information gathered by these clearinghouses will bring crucial transparency to the OTC derivatives market,” Schumer said.

In May, the Obama administration proposed regulating the OTC derivatives market by requiring that all standardized derivatives be traded via central clearinghouses, which would allow for netting of exposures and would require parties to back their trades by posting adequate collateral. However, there are multiple clearinghouses, and more are springing up in the wake of the administration’s proposal, Schumer said. Absent a central repository, he noted that marketwide information regarding the various OTC derivatives markets would remain fragmented and incomplete, depriving regulators of crucial information required to monitor systemic risk.

“The market for OTC derivatives can significantly impact the overall health of our financial system, yet trade information is not available to investors and regulators. We need to make sure that OTC derivatives never again contribute to an economic crisis,” the senator said.

Schumer’s state is home to major clearinghouse Depository Trust & Clearing Corp. It provides clearing, settlement and information services for a variety of financial instruments, including OTC derivatives.

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