By Alexandra Alper WASHINGTON, June 29 The U.S. Commodity Futures Trading Commission voted unanimously behind closed doors on Friday to propose two key measures outlining how U.S. swaps regulations will apply overseas. 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. The CFTC was tasked by the 2010 Dodd-Frank financial reform 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 new regime is how broadly U.S. derivatives rules will reach into the overseas operations of U.S. and foreign banks. Regulators have struggled to balance the need for broad oversight -- to prevent offshore risk from damaging the U.S. financial system -- with the aim of creating a level playing field that gives no firm a competitive advantage. "We must not forget the lessons of the 2008 crisis and earlier," CFTC Chairman Gary Gensler said in a statement. "Swaps executed offshore by U.S. financial institutions can send risk straight back to our shores." One measure proposed by the CFTC gives guidance on which entities and transactions will be subject to U.S. "entity level" and "transaction level" rules. "Entity level" rules include how much capital is needed to back a trade, while "transaction level" requirements detail the amount of collateral a firm must put up for its transactions. The second measure would grant U.S. and foreign firms a delay in complying with certain "entity level" requirements such as business conduct standards. Foreign firms will have 12 months to comply, while U.S. firms will have until January 2013. To take advantage of the delay, foreign firms would have to register with the National Futures Association and submit a compliance plan for meeting U.S. or foreign swaps rules. It is not yet clear in practice how aggressive the overseas reach will be. The guidance will be put out for public comment for 45 days, while the proposed compliance delay will be put for 30 days of comments. HOT DEBATE U.S. regulators are first in line to put swaps reforms in place, which has led U.S. banks to fear their business will move abroad to firms not subject to tough U.S. rules. But U.S. regulators point to recent history to demonstrate the need for broad regulations. "The recent Barclays matter, the JPMorgan loss and many other illustrations make the case for this far better than anything else," said Bart Chilton, a Democratic commissioner at the CFTC. JPMorgan Chase & Co announced a multibillion-dollar trading loss on a complex derivatives trade, and U.S. and British authorities fined Barclays $450 million for manipulating the rate at which banks lend to each other, reigniting calls for tough banking oversight. Risky derivatives trading at overseas subsidiaries of firms such as insurer American International Group severely damaged the U.S. financial system during the 2007-2009 financial crisis and led to multibillion-dollar taxpayer bailouts. Scott O'Malia, a Republican commissioner and frequent critic of the agency's rules, voted for the measures, but criticized the guidance as overly broad, and lacking sufficient collaboration with foreign regulators. "I would like to make it clear that if I were asked to vote on the proposed guidance as final, my vote would be no," he said in a statement. O'Malia also said he would have preferred that the agency issue a formal rule instead of guidance. Rules, unlike guidance, require the agency perform a cost benefit analysis, which have been fodder for industry suits against the CFTC. The Securities Industry and Financial Markets Association echoed O'Malia's concern. "We are disappointed that the CFTC has issued proposed guidance in an attempt to circumvent the requirement for a cost-benefit analysis," said Tim Ryan President of SIFMA, one of the groups that has sued the agency over a cost benefit analysis. The CFTC is not required to issued guidance or a rule about the reach of its swaps rules. A swap is a financial contract in which two parties exchange cash flows on debt, currencies, or other assets, to hedge risk or make a profit. The guidance and the delay will be available for public comment for 45 days and 30 days, respectively, after which the CFTC would vote on the final versions.