UPDATE 1-US gives swap dealers more time as overhaul kicks in

Tue Nov 20, 2012 4:41pm EST

* Industry had warned about giving away sensitive data
    * April 10, 2013 is new final end-date
    * Rule-making process rife with set-backs


    By Douwe Miedema
    WASHINGTON, Nov 20 (Reuters) - A top U.S. regulator gave
swap dealers more time to report their trades to a data
warehouse, granting its next temporary reprieve as an overhaul
of the sprawling derivatives industry begins to kick in.
    The dealers may now wait longer before they start reporting,
after they complained that early registration by some meant that
sensitive commercial information could become public.
    "The public dissemination of data reported by one, or even a
few, early registrants may facilitate the identification of
parties to the swaps for which data has been reported," the
Commodity Futures Trading Commision (CFTC) said.
    In a so-called "no-action" letter - a way to give market
parties more time to comply with a rule without having to revoke
it - the CFTC also said that swaps dealers needed to comply with
the rules on April 10, 2013 at the latest.
    The delay is one of several the CFTC has provided, as it
hammers out rules laid down in the Dodd-Frank law designed to
avoid a repeat of the 2008 crisis, which brought the global
financial system to the brink of collapse.
    "It may slow down the pace of regulations coming about, but
I don't think in the end it will have very much of an impact.
These regulations are going to come into effect one way or
another," said Elan Mendel at law firm Shipkevich PLLC.
    The reprieve is valid only for interest rate swaps and
credit default swaps. Foreign exchange, equity and other
commodity swaps will need to be reported by Jan. 10.
    The CFTC's rule-making process has been rife with setbacks,
and is widely expected to face more legal challenges as the
regulations - which could make the business far less lucrative -
are starting to bite.
    The rules aim to make the opaque swaps markets - a $650
trillion industry dominated by large investment banks such as JP
Morgan, Barclays and Bank of America/Merrill
Lynch - more transparent.
    Swaps dealers had worked on the understanding that they
would all be required to begin reporting on the same day, and
had said costly modifications were needed if that wasn't the
case, the CFTC said in a letter on Tuesday.
    Swaps are a loose denomination for a variety of largely
unregulated financial instruments that are traded bilaterally,
and not on exchanges. This made them hard to trail for
regulators when the crisis hit in 2008.
    
    LAST MINUTE WRANGLING
    The regulator, which has adopted an aggressive new profile
under Chairman Gary Gensler - a former Goldman Sachs 
banker - after the Dodd-Frank overhaul gave it vast new powers,
also granted dealers more time to report historical data.
    The CFTC's registration rules mean the dealers need to
register no later than two months after the end of the month in
which they exceed a certain threshold, with the earliest
registration deadline is Dec. 31.
    They may now wait until the deadline for registration before
they start reporting data - though no later than April 10, 2013
- even if they have registered earlier.
    Historical data may be reported one month after
registration, but also no later than April 10.
    The reporting needs to take place to data warehouses, or
so-called Swaps Data Repositories (SDRs), run by commercial
providers such as the Depository Trust and Clearing Corporation
and the Intercontinental Exchange. 
    In October, the CFTC gave the industry more time to comply
with a host of rules, sending out a batch of no-action letters
on several issues raised by industry participants.
    A month earlier, a judge decided that the CFTC had no
explicit mandate to introduce a new rule to curb speculation in
commodity markets by putting caps on trading positions. The CFTC
has said it will appeal that ruling.
    In a further sign of the administrative burden the CFTC's
rule-making progress is bringing on, the American Public Power
Association (APPA) in a letter to Gensler complained that an
exemption for utilities it was granted did not work.
    Counterparties entering into swaps with government-owned
utilities were allowed to deal in up to $800 million in swaps
without having to register, the CFTC said in October, far higher
than an earlier threshold of $25 million.
    "Unfortunately, to date, the no-action letter does not
appear to have produced the hoped-for effect of getting
counterparties back to the table," APPA said in an email, urging
the CFTC for permanent relief.
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