By Karen Brettell

NEW YORK, Nov 12 (Reuters) - Brokers in the $450 trillion privately traded derivatives markets would continue to be able to make trades via the telephone and avoid trading the contracts on exchanges under a U.S. bill to regulate the markets.

If passed into law, the legislation could override efforts to make trade prices and volumes in derivative contracts more transparent. Negotiations over regulation of the markets are, however, fluid.

Members of Congress are working through various bills to regulate derivatives in an effort to reduce risks and enhance transparency in the over-the-counter contracts, some of which were central to spreading risky assets at the heart of the credit crisis.

Regulatory proposals include requirements that most of the contracts are cleared through central counterparties and that cleared trades are also traded on exchanges.

A bill approved by the House Agriculture Committee, however, would allow trades to continue to be made by telephone, as many are done currently, so long as they are centrally cleared and reported in repositories.

This is because the legislation requires that contracts trade on exchanges or Alternative Swap Execution Facilities. The definition of an ASEF in the bill includes a "confirmation facility" or "any voice brokerage facility."

Many credit default swaps, contracts used to insure against a borrower defaulting on their debt, are entered into in phone conversations and confirmed electronically. This is particularly true of banks trading with each other, which typically transact through interdealer brokers.

The use of exchanges or other electronic trading platforms for derivatives would provide more information to investors on trade prices and volumes.