I have to say that it is with some relief that I read that the draft bill on compulsory central clearing for CDS being touted by Barney Frank in the US Congress, is to exempt many non-financial firms (ie those that are actually using them as they were designed - to hedge risk). Frank's bill exempts swaps from new rules requiring centralized clearing that are meant to bring more visibility to the market if 'one of the counterparties to the swap is not a swap dealer or major market participant.'

This means that not only the buy-side, but other end-users such as airlines, agricultural businesses and other large corporations, have in fact had their pleas about being forced to deposit the collateral required to satisfy margin requirements involved in centralised clearing heard. The draft bill has also attempted to define the "categories" of derivatives that will, in the future, determine their supporting infrastructure. Or as Democratic Representative Michael McMahon said in a statement the draft addresses broad risks to the economy from OTC derivatives 'by mandating exchange clearing and trading for the majority of products, while preserving the over-the-counter market for specialized contracts.'

This can only be good news for the US OTC market. As for the EU, I will know more after I have read CESR's consultation paper on Trade Repositories so watch this space....