Friday, June 29, 2012

Reuters: Regulatory News: US CFTC poised to OK overseas treatment of swaps rules

Reuters: Regulatory News
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US CFTC poised to OK overseas treatment of swaps rules
Jun 29th 2012, 16:58

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Fri Jun 29, 2012 12:58pm EDT

  By Alexandra Alper      WASHINGTON, June 29 (Reuters) - The U.S Commodity Futures  Trading Commission was poised on Friday to announce it had  unanimously voted to pass two key measures outlining broadly how  U.S. swaps regulations will apply overseas, people familiar with  the matter said.      The measures had previously been slated for a public vote  last Thursday, but the meeting was abruptly canceled due to  last-minute negotiations between two Democratic Commissioners.       At issue is how to ensure a level playing field for swaps  players as reforms are put in place at different paces globally  after the financial crisis.      The CFTC is among the first of the international regulators  to move on the new rules and wants to ensure that U.S. firms  aren't put at a competitive disadvantage as a result.      One of the measures would give guidance on which entities  and which transactions will be subjected to U.S. "entity level"  and "transaction level" rules.      "Entity level" rules include how much capital is needed to  back up a trade, while "transaction level" requirements detail  the amount of collateral a firm must put up for its  transactions.       The other measure is an exemptive order that will give some  swaps players extra time to comply with certain CFTC "entity  level" regulations.      The CFTC was tasked by the 2010 Dodd Frank law with writing  a raft of rules to boost transparency and limit risk in the  murky $650 trillion over-the-counter swaps market.     One of the most hotly debated pieces of the Dodd-Frank swaps  rules is how broadly U.S. derivatives rules will reach into the  overseas operations of U.S. and foreign banks.       Risky derivatives trading at overseas subsidiaries of firms  like insurer American International Group severely  damaged the U.S. financial system during the 2007-2009 financial  crisis and led to multibillion-dollar taxpayer bailouts.       CFTC Chairman Gary Gensler has pointed to JPMorgan Chase &  Co's multibillion dollar loss-- from trades the bank booked in  London -- to highlight the need for a tough overseas swaps  regime.      But the banking industry and foreign regulators have pushed  back, warning that an overly broad regime might duplicate or  conflict with rules of foreign regulators, or put certain banks  at a competitive disadvantage.  

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