UPDATE 1-Europe, Asia banks join U.S. in swap dealer line-up

Wed Jan 2, 2013 3:02pm EST

* Banks register with National Futures Association

* Royal Dutch Shell, other big energy traders don't register

* Firms will register as they hit $8 bln threshold

By Douwe Miedema

WASHINGTON, Jan 2 (Reuters) - Asian and European banks registered as U.S. swap dealers this week, joining Wall Street rivals in complying with new rules that aim to shed light on the opaque $650 trillion derivatives market.

Deutsche Bank, Commerzbank, Societe Generale, BNP Paribas and Nomura were among the swap dealers listed in the registry of the National Futures Association (NFA), a U.S. regulator.

But large energy traders such as Royal Dutch Shell, Cargill and Glencore were conspicuously absent from the list, a sign of how the market is dominated by investment banks that largely serve speculators.

In 2009, the world's largest countries agreed to clamp down on the unregulated swaps market, which has been blamed as a major contributor to the global financial crisis.

Regulators such as the U.S. Commodity Futures Trading Commission are setting tighter standards for trading and data reporting, among a host of other measures.

Swaps can be used to protect against the financial effects of a change in interest rates, currency rates, the risk of default, or commodity or energy prices, but are now largely used purely for financial gains, or speculation.

A small group of companies that use swaps for genuine hedging purposes of physical assets such as commodities, or use them to hedge financial liabilities in their daily business practice, is exempt from the CFTC's rules.

But any other trader hitting a volume of more than $8 billion in swaps in the past 12 months needed to register as of Dec. 31, according to the CFTC's rules.

"The public ... will benefit as swap dealers now will be subject to common-sense standards ... that will help lower risk to the rest of the economy," CFTC chairman Gary Gensler said in a press release.

GROWING NUMBER

Energy traders may join the list once they meet the $8 billion threshold, or not at all if they don't trade swaps in sufficient quantity. A spokeswoman for Shell, for instance, said the company would register if and when it hit the $8 billion mark.

Energy traders' swaps dealing business is often largely done on behalf of clients, making them direct competitors to the largest investment banks.

JPMorgan, Citibank, Bank of America and Goldman Sachs are the U.S. banks among the more than 60 names mentioned in the NFA's registry.

The list marks the first line-up of swaps dealers active in the United States, even if the names of the domestic banks were roughly known through data from the Office of the Comptroller of the Currency, another regulator.

The number of dealers is set to grow in the coming months, as more will meet the $8 billion threshold, with each last day of the month marking a deadline.

Swaps are currently traded in bilateral deals over the phone, but that will need to change under new global rules, such as the U.S. Dodd-Frank overhaul of Wall Street.

Trading will need to take place on regulated platforms - similar to stock exchanges - and clearing houses will stand in between buyers and sellers to mitigate the risk of counterparty default and prevent market crashes.

Registration is a first deadline to be met in the Dodd-Frank rule-writing, which is done in large part by the CFTC - whose powers have been vastly expanded to include swaps oversight - and by the Securities and Exchange Commission.

Real-time reporting of swap dealing also started at the beginning of the new year, the CFTC said, and data would become publicly available through data warehouses.

The NFA, which has been made responsible for registration by the CFTC, said it had been working overtime to meet the deadline, expanding its staff in the past two years and responding to thousands of queries from registrants.

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