WASHINGTON (AP) — Federal regulators proposed setting minimum capital levels that banks and other firms that trade derivatives must hold as a cushion against risk.
The Securities and Exchange Commission voted Wednesday to seek public comment on the proposed rules, which also would set collateral requirements and keeping customer funds separate from a firm’s. The financial overhaul law passed in 2010 called for new oversight of derivatives, the complex investments blamed for hastening the financial crisis, and required the SEC to write the rules.
The value of derivatives hinges on an underlying investment or commodity — such as currency rates, oil futures or interest rates. The derivative is designed to reduce the risk of loss from the underlying asset.
The SEC’s proposal applies to derivatives based on securities such as stocks and bonds. It is similar to rules proposed previously by the Commodity Futures Trading Commission for other kinds of derivatives.