Wall Street banks including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Barclays PLC committed to process 80% of all eligible credit-default swap trades starting in October through clearing houses designed to prevent a chain of dealer defaults. The banks also agreed to clear 70% of new eligible interest rate derivative trades starting in December, according to a letter to regulators signed by 15 companies and released by the Federal Reserve Bank of New York.
Regulators have been pressing for much of the existing $592 trillion market in OTC derivative trades to be moved to clearing houses to reduce risk to the financial system. The push by regulators for greater regulation follows the collapse last September of Lehman Brothers Holdings Inc. and the rescue of American International Group Inc. after it made bad bets using credit-default swaps. The privately traded, largely unregulated contracts complicated government efforts to assess systemic financial risk because no one knew how interconnected the banks had become.