Levin calls on Treasury to apply tougher rules to foreign exchange derivatives

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The reported rigging marks the latest controversy to surround a widely used market measure, following multiple allegations of rigging of the London Interbank Offered Rate (Libor), a benchmark interest rate used to set rates on a host of consumer products.

Levin argued Wednesday that the Treasury needs to subject foreign exchange derivatives to the same increased scrutiny as other derivatives, which now are facing increased oversight and transparency from the Dodd-Frank financial reform law.

The senator also called on regulators to finally implement the so-called "Volcker Rule," which bans proprietary trading by banks hunting for profits on their own and limits their relationships with hedge funds.

"The Treasury Department should reconsider its ill-advised exemption of foreign exchange derivatives from the full protections of the Dodd-Frank Act," he said. "Our financial regulators should protect American businesses and families from price rigging abuses by fully regulating these derivatives trades and by finalizing the long overdue Merkley-Levin provisions on proprietary trading and conflicts of interest."

In November, the Treasury announced it was exempting foreign exchange derivatives from the new Dodd-Frank requirements, arguing the transactions are not subject to the same risk as other derivatives transactions, and already exist in a highly transparent market.