We have yet to complete the reforms needed to raise capital standards, improve liquidity, reform the securitisation process and regulate the OTC derivatives market.

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During the financial crisis, the credit default swap (CDS) market, a part of the OTC derivatives market, took center stage as difficulties in financial markets began to intensify and the counterparty risk involved in a largely bilaterally cleared market became apparent.

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Exchanges such as CME Group, Nasdaq OMX and NYSE Euronext are lined up to get a piece of the over-the-counter (OTC) derivatives market as new regulations will require derivatives trading to go through exchanges and be cleared through clearing houses.

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The CFTC temporarily provides a broad exemption for over-the-counter (OTC) derivatives trading so the market can continue to operate as usual until regulators complete the new rules.

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Expect them to bog down quickly on how to regulate of the multitrillion-dollar market for OTC derivatives, which operate outside the direct reach of regulators and are partly to blame for the financial crisis having felled American International Group, one of the largest U.S. financial companies, and Lehman Brothers.

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So the loophole: in its treatise on derivatives, Congress left out a market: OTC equity options.

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