September 27, 2013 / 5:39 PM / 7 years ago

U.S. swaps regulator rushes plan approvals as shutdown looms

WASHINGTON, Sept 27 (Reuters) - The U.S. derivatives regulator has been rushing through approvals for a new untested type of trading platform before a possible government shutdown next week, the head of the agency said on Friday.

The agency has hastily pushed out approvals for companies planning to run the exchanges to trade swaps - called Swap Execution Facilities - that will go live Wednesday, as part of an overhaul of Wall Street after the crisis.

“We now have this date of Oct. 2 coming, so we did move through the 17 temporarily registered Swap Execution Facilities,” Gensler told journalists.

“Frankly, the documents get only the briefest of reviews to get them ... out the door,” he said at a conference, adding the agency was starved of funds anyway because of budget cuts.

The U.S. government was bracing on Friday for the possibility of a shutdown of operations on Oct. 1, as a fight over public spending reaches fever pitch and Congress struggled to pass an emergency spending bill.

The measure would affect the CFTC because unlike the banking regulators, it is not self-funded.

Swaps are complex financial contracts that can be used to offset financial risk, but are also a favourite speculation tool for hedge funds, and were widely blamed for exacerbating the 2007-09 financial crisis.

The new platforms are one measure to regulate the $630 trillion market - dominated by investment banks such as JP Morgan Chase & Co, Bank of America and Citigroup - to make it more transparent and less risky.

The companies that had registered to run a SEF have to comply with the CFTC’s new rules that regulate how trading takes place on Oct. 2, but many had complained that they and their clients weren’t ready to make the shift.

At a meeting with the industry this month, two CFTC Commissioners signalled the SEFs might get more time to comply with its rules and let them sort out a spate of logistical issues before trading started.

But Gensler - a former Goldman Sachs banker - indicated that a wholesale delay of the date was not an option, even though the agency was working on a few minor last-minute excemptions from the rules.

“Any relief that we might issue ... we’ll get out by Monday because if there were a government shut-down employees can’t come in to do such things,” he said.

The relief would only be for the obligation to report trades to data warehouses in two asset classes - foreign exchange and energy - where platforms were less well prepared than for interest rates and credit, Gensler said.

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