UPDATE 1-Cargill joins Wall Street banks as swap dealer

Thu Feb 21, 2013 1:03pm EST

By Douwe Miedema

WASHINGTON Feb 21 (Reuters) - Commodities trader Cargill Inc has registered as a swap dealer with the U.S. derivatives regulator, a sign that new financial stability rules have started affecting firms well outside Wall Street.

Cargill, one of the world's largest privately held firms, is the first major non-financial company to acquire the status of "swaps dealer" from the National Futures Association (NFA), which lists the biggest players in the $630 trillion derivatives market.

So far, only large Wall Street firms had lined up with the NFA after registration became mandatory at the beginning of the year, such as JPMorgan, Bank of America and Deutsche Bank.

Cargill said it had applied to be a swap dealer because services its Cargill Risk Management unit provided had brought it within the definitions of the law.

In 2009, the world's largest economies agreed to clamp down on the unregulated swaps market, which has been blamed as a major contributor to the global financial crisis, leading to adoption of the Dodd-Frank law in the United States.

The U.S. Commodity Futures Trading Commission (CFTC) and other regulators are setting tighter standards for trading and data reporting, among a host of other measures. Firms dealing in swaps must also register with the NFA.

Energy traders such as Royal Dutch Shell, Valero and Chevron have so far been conspicuously absent from the NFA's list, a sign of how the market is dominated by investment banks.

That Minneapolis-based Cargill is the first to register underscores its size: it buys, processes and distributes in dozens of commodity markets, from cocoa and sugar to livestock, grains and cotton.

Swap dealers need to become members of the NFA, a self-regulatory body, and are audited on whether they comply with the CFTC's rules, aimed at making derivatives markets less susceptible to collapse.

Clearing houses will need to stand in between buyers and sellers to limit the risk of a counterparty defaulting, and data on swaps dealings need to be reported to regulators and in part also to the general public.

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

But any other 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, with deadlines expiring at the end of each calendar month.