CFTC to define swap dealer at Feb 23 meeting

WASHINGTON Thu Feb 16, 2012 5:25pm EST

WASHINGTON Feb 16 (Reuters) - The U.S. futures regulator said on Thursday it will unveil on Feb. 23 rules that will shed more light on which firms will be forced to set aside additional funds to cover their transactions in the swap market as it moves to toughen oversight in the once opaque market.

The U.S. Commodity Futures Trading Commission is expected to vote on a final rule that would define a swap dealer and a major swap participant. The Securities and Exchange Commission, which is working with the CFTC on the joint rules, may also vote on a similar measure next week.

When the measure was first proposed in December 2010, a firm would be designated as a dealer if the aggregate notional amount of swaps entered into in a year exceeded $100 million.

Some industry watchers and CFTC officials have expressed concern that many end users will be unintentionally swept up in the dealer definition if it is too broad, subjecting them to higher costs to hedge their commercial risk.

The rules have drawn intense lobbying by companies ranging from Morgan Stanley to utilities such as Exelon that have argued they should not be required to tie up additional capital unnecessary.

The CFTC is working to complete a regulatory framework for the previously opaque $700 trillion over-the-counter derivatives market required under the 2010 Dodd-Frank law.

The regulator so far has finalized more than 20 rules, and has laid out an aggressive agenda to complete about 20 more, including capital and margin rules, and end user exemptions.

The CFTC also will vote next week on a proposed rule on procedures to set minimum block sizes for large notional off-facility swaps and block Trades; and further measures to protect the identities of parties to swap transactions.

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