With more and more over-the-counter transactions expected to be cleared, lawmakers are turning their attention to ownership structures of clearinghouses. In late March, Sen. Sherrod Brown (D-OH) proposed an amendment to the Senate Banking Committee’s financial regulatory bill that would restrict shareholder ownership of a clearinghouse by large banks to 20%. The Senate has yet to debate on whether Brown’s amendment will be included in the bill. A similar amendment introduced by Rep. Stephen Lynch (D-MA) that was added to the House’s regulatory bill would also ban dealers from owning more than 20% of a clearinghouse.

The argument against it is that for future clearinghouses, capital that would be invested in them would be limited because banks could only have a 20% stake.

“Financial institutions don’t want to lose [clearing] business,” says Willa Bruckner, partner at Alston & Bird. “There’s concern that without participation of significant financial institutions, these clearing entities might not have significant capital. If they don’t have significant funds, they can’t provide protection against systemic risk.

On the other hand, if the ownership by the big financial institutions is not limited, they could control the process. “If the financial institutions want to keep some of the business out of the clearinghouses, all they have to do is use their influence over the clearinghouses to reject a contract,” she says.

Spencer Patton, chief investment officer at Steel Vine Investments, notes that the amendment does not apply to existing clearing firms and only new firms will be affected. “There’s a lot of opposition to this amendment. If this passes, it’s more about the evolution of clearinghouses,” he says.

Bruckner says it’s very difficult to predict whether Brown’s amendment will be included in the Senate bill. “There are very strong feelings on both sides. It was a very significant debate in the House (on the Lynch amendment) so I would expect [the same thing] to happen in the Senate,” she says.