SEC head prods Congress on derivatives rules

WASHINGTON (Reuters) - The top U.S. securities regulator said market watchdogs need to supervise credit default swaps, securities blamed for exacerbating 2008's market meltdown and more recently the Greek debt crisis.

"If we continue to allow these risky financial products to operate in the dark we should not be surprised at the damage we find when the lights come on," Securities and Exchange Commission Chairman Mary Schapiro said in a statement, without commenting on Greece's situation.

The swaps, also blamed for nearly toppling insurer AIG, are sold to investors to protect them from the risks of a debt default. They are also used to bet on whether a company or other entity will default on its debt.

The Greek prime minister and finance minister were in Washington this week pushing for tough rules for credit default swaps.

Reuters had asked Schapiro whether there should be any ban or limits placed on naked swaps, where the holder of the swap does not own the underlying bond.

In reply, Schapiro said credit default swaps are often used as substitutes for securities and directly impact the markets.

"As such, they should have at least the level of oversight and transparency that are present in the regulated securities markets," she said.

The White House and many lawmakers want to shed light on credit default swaps and the $450 trillion over-the-counter derivatives market by requiring most derivatives to be traded on an exchange or cleared by a central clearinghouse.

Earlier on Thursday, the chairman of the Commodity Futures Trading Commission chided Wall Street for resisting calls to make over-the-counter derivatives markets more transparent. Gary Gensler said Wall Street firms have benefited from opacity and inefficiencies in the markets.

Legislation to put more of the derivatives trade within regulated markets is still being negotiated in the U.S. Senate, with lawmakers struggling over who should be forced to comply.

(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)