Clearinghouses need member transparency-CFTC official

CHICAGO, Sept 3 (Reuters) - Clearinghouses gearing up to handle trillions of dollars of over-the-counter derivatives under the new Wall Street reform law must be transparent in how they decide who participates, a top government official said on Friday.

The new U.S. law will force most over-the-counter derivatives through clearinghouses, whose ability to guarantee trades through the mutual backing of its members is seen as a way to reduce risk in the $615 trillion market blamed for accelerating the 2008 credit crisis.

Exactly which contracts will need to be cleared, and who will get to clear them, hangs in the balance as the U.S. Commodity Futures Trading commission and the Securities and Exchange Commission write detailed rules to implement the law.

Futures brokers have been clamoring to take part in the potentially lucrative business, saying broader membership will reduce overall risk in the system.

Dealers, who currently run the over-the-counter derivatives market, say clearinghouses must be choosy who they allow in to make sure that any potential member default can be prevented from upsetting the broader financial system.

Ananda Radhakrishnan, director of CFTC's clearing division, said clearinghouses will need to weigh the risks but whatever their decisions, they must make them in the open.

"On the one hand you want to make sure that only those who qualify get in," Radhakrishnan said at a symposium sponsored by the Chicago Federal Reserve to discuss clearing.

Clearinghouses will need to take capitalization and the ability to manage risk into account when deciding on membership, he said.

But most important, he said, is that the "criteria for membership be as transparent as possible, and as objective as possible."

He suggested one possibility would be to have different classes of membership for different cleared assets.

The law requires the new rules on OTC clearing within 180 days, a deadline he said his commission intends to meet.

CME Group Inc (CME.O), IntercontinentalExchange Inc (ICE.N) and London-based LCH.Clearnet are among major clearinghouse operators vying for business from the over-the-counter markets. The market is also attracting attention from new entrants such as Nasdaq OMX Group Inc (NDAQ.O)-owned International Derivatives Clearing Group.

(Reporting by Ann Saphir, Editing by Chizu Nomiyama)