Derivatives Regulation Approved by House Panel

Legislation that would regulate the over-the-counter derivatives market for the first time won approval from the House Financial Services Committee Thursday, after members adopted an amendment that would require many more derivatives to be traded on public exchanges.

The panel approved the bill by 43-27, with Walter B. Jones of North Carolina the only Republican to join panel Democrats in support of the measure.

But first, the committee adopted, 39-25, an amendment offered by Chairman Barney Frank, D-Mass., that would shift more derivatives trades onto exchanges, an effort to bridge a divide between warring factions on the issue. The Obama administration and the Agriculture Committee favor more trading on regulated exchanges to boost transparency in the derivatives market, but House Republicans and the financial industry are resisting the change, saying it could reduce the availability of many derivatives.

The bill is part of a broader push by the Obama administration and Congress to beef up regulation of the nation's ever-changing financial services industry. It would bring the multi-trillion dollar market for over-the-counter derivatives under significant government regulation for the first time. Companies buy derivatives, which function in many respects like insurance, to protect themselves against interest rate fluctuations, fuel price spikes and other business risks.

After approving the derivatives measure, the committee moved on to its next major regulatory proposal, legislation addressing consumer protections in financial services. But Frank said that markup would slip into next week.

The committee planned to tackle an initial round of amendments to the consumer protection bill Thursday, and then resume at 2 p.m. Tuesday, with the hope of finishing the bill next Wednesday.

It will then begin marking up a bill to protect capital markets investors.

"I think this is sufficient progress for us to give ourselves, our staff, some time," Frank said.