The President’s Working Group on Financial Markets is looking at ways to better understand and regulate derivatives and credit default swaps, which essentially are insurance on corporate debt.

One idea is to create a central clearinghouse for credit default swaps and have the Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission share information on them, including prices and trading volume. The goal is to “increase market transparency to monitor market trends, identify potential issues and prevent market manipulation and insider trading.”

Treasury Secretary Henry Paulson heads up the President’s Working Group on Financial Markets, with other members include Fed Chairman Ben Bernanke and SEC Chairman Christopher Cox.

In a statement issued Friday, Cox said: “The virtually unregulated over-the-counter market in credit default swaps has played a significant role in the credit crisis, including the now $167 billion taxpayer rescue of AIG. The SEC has regulatory and supervisory authorities over the clearing agencies that may be established for credit default swaps, and we will use those authorities to strengthen the market infrastructure and to protect investors.”

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