Regulators announced an agreement Friday to share information about credit-default-swap clearing houses to ease fears about the impact on the CDS market of a brewing agency turf war.
Under the guidance of the President's Working Group on Financial Markets, the Commodities Futures Trading Commission, the Federal Reserve Board and the Securities and Exchange Commission said they would share information on the management of competing clearing houses being set up to standardize CDS trading.
One of the two clearing houses, created by CME Group, will be overseen by the CFTC. The other, created by The Clearing Corp. and IntercontinentalExchange Inc., will be governed by the Federal Reserve Bank of New York.
The move came after weeks of squabbling among the agencies over which one was best qualified to regulate financial derivatives.
Under the nonbinding agreement the agencies will share details "upon request" about their governance of the clearing houses and any changes they make to their risk management, liquidity, and financial policies. They will also consult with one another on CDS market conditions and designate communications liaisons.
Industry observers praised the agreement.
"It creates a little bit of clarity on how the regulators will work together," said Dino Kos, managing director of Portales Partners and a former official at the New York Fed.
The memo was part of a statement by the working group on the regulation of CDS contracts. The group also emphasized the need for more transparency in the CDS market and endorsed goals for international cooperation on its regulation laid out by the Financial Stability Forum, a global coalition of regulators.