A legislative proposal for derivatives regulation has been release from the Obama administration. The actual bill is IMPROVEMENTS TO REGULATION OF
OVER-THE-COUNTER DERIVATIVES MARKETS(large pdf). Here is he U.S. Treasury overview of the bill in a press release.

First, what kills me is the Treasury calls OTC and CDSes financial innovation. I don't think mathematical fiction is a new science frankly. It's so strange to me that no one is looking to regulate these instruments themselves.

Ok, what's in the bill (or what is not in it)?

The Wall Street Journal:

To help ensure support and dodge another regulatory turf battle, the administration proposed spreading regulatory responsibility across several federal agencies. The 115-page draft bill would give the bulk of the proposed new powers over derivatives to the Securities and Exchange Commission and the Commodity Futures Trading Commission but also keep banking regulators in the mix by granting them authority to oversee banks that deal in derivatives.

Not all derivatives will be regulated and small investors as well as some smaller governments will not be allowed to trade. There is some stuff about standardizing derivatives but it's clear there is a gaping hole, since customized "special" derivatives would then no be subject to regulation.

I'm putting this up there for anyone else wanting to scan the bill and point out details.

I noticed there are a lot of things undefined, instead left to regulators to define within 180 days. These include capital and margin requirements.

For a history of derivatives, read Origins of the Subprime Crisis, Derivatives. To scan all of the EP posts on derivatives, click here.

Previous post on Geithner's derivatives regulation plan.

Derivatives Dribble also defines a naked CDS.