Clearinghouses meant to reduce swaps market risk must face greater oversight to ensure that they don’t threaten the financial system, according to a member of the U.S. Commodity Futures Trading Commission, Bloomberg News reported today. Regulators should weigh having clearinghouses put up more of their own capital in the event of a default and requiring them to undergo standardized stress tests, said Commissioner Mark P. Wetjen. After the 2008 credit crisis highlighted the threat posed by financial companies’ exposure to swaps, regulators including the CFTC moved to require that most trades be guaranteed at clearinghouses including those owned by LCH.Clearnet Group Ltd., CME Group Inc. and Intercontinental Exchange Inc. “As clearing volumes increase, however, we need to be cognizant of, and effectively address, the resulting increased concentration of risk,” Wetjen said.
