UPDATE 4-New York regulator halts plans to oversee CDS market

(Adds further comment from hearing)

NEW YORK/WASHINGTON, Nov 20 (Reuters) - New York Insurance Superintendent Eric Dinallo will put his plans to regulate part of the credit default swap market on ice, instead favoring a broader regulatory plan, he said in Congressional testimony in Washington on Thursday.

Dinallo, who had said in September that he would start in January to regulate the part of this market that is considered insurance, said he now believes it would be counterproductive to have multiple regulators.

"It would not be effective or efficient for New York to regulate some transactions under the insurance law, while other transactions are either not regulated or regulated under some other law," he told a Congressional committee.

"The best outcome is a holistic solution for the entire credit default swap market," he said.

Dinallo's call for jurisdiction of the estimated 20 percent of the $47 trillion market that could be classified as insurance was viewed by many as a plan to spark federal regulators into action, and unlikely to be implemented.

Dinallo said in his testimony that his announcement preceded a call from Securities and Exchange Commission for the power to oversee the market, and meetings held by the New York Federal Reserve about how regulation should be implemented.

"The result has been exactly what was envisioned -- a broad debate and discussion about the best way to bring controls and oversight to this huge and important market," he said.

REGULATORS WANT OVERSIGHT OF CLEARINGHOUSE

The Federal Reserve, SEC and Commodity Futures Trading Commission are working together to develop a central clearing infrastructure for credit default swaps and have recently signed a memo of understanding to that effect.

However, at a Congressional hearing, regulators each said their portfolios applied to the clearinghouses.

The CFTC said it had oversight of operations run by futures exchanges. The Fed noted one type of clearinghouse would be organized as a bank, and the SEC said its jurisdiction applied to instruments that are securities based.

Virginia Rep. Bob Goodlatte, the top Republican on the committee, said he feared a jurisdictional dispute among regulators would mean uneven or incomplete regulation of clearinghouses.

Committee Chairman Collin Peterson, a Minnesota Democrat, said he was concerned at prospect of inexperienced agencies overseeing trading houses.

"While the Fed has no experience in regulating the type of central clearing counterparty under consideration, the CFTC has long experience in just that area," said Peterson.

Dinallo said there could be an advantage to allowing different types of clearinghouses to go into business.