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Financials

UPDATE 4-US CFTC unveils plan to treat ag swaps like others

 * Plan harmonizes ag swaps rules with other swaps rules
 * Would open up the market to more players, farmers
 * "Very positive" development - grain swaps broker Atlas
 * Commissioner Dunn: CFTC is in "budget crisis"
 * Next rule-making meetings: Jan. 26, Feb. 11, 24
 (Adds comments from grain swaps broker Atlas and Republican
Scott Garrett)
 By Roberta Rampton and Ayesha Rascoe
 WASHINGTON, Jan 20 (Reuters) - The U.S. futures regulator
unveiled a plan on Thursday that would treat agricultural swaps
just like other over-the-counter derivatives, a move that would
open up the market to a wider range of participants.
 Under the plan, the Commodity Futures Trading Commission
would remove existing requirements that traders of agricultural
swaps -- used by buyers and sellers of farm goods to protect
against the risk of price movements -- have a net worth of at
least $10 million.
 Instead, participants will be subject to the same
regulations as all traders in the swaps market, the CFTC said.
 Among other conditions, those rules require swaps
participants to have a net worth of at least $1 million.
 "It lowers the bar," Don Heitman of the CFTC's market
oversight division said, noting more farmers could use the
products for hedging their risk.
 The rule was approved by all five CFTC commissioners, who
voted to open it up for comment for 60 days. The commissioners
will have to vote again to finalize the rule.
 "Agricultural producers, packers, processors and handlers
will benefit from the ability to use agricultural swaps to
hedge their risk," CFTC Chairman Gary Gensler said.
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 FACTBOX-Agricultural swaps rule           [ID:nN20291009]
 Comments on ag swaps          r.reuters.com/tyt57q
 FACTBOX-CFTC rulemaking to-do list        [ID:nN18195182]
 Take a Look                                 [ID:nCFTCREG]
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 BROKER CALLS MOVE "VERY POSITIVE
 Globally, all commodity over-the-counter swaps -- including
agricultural swaps -- were valued at around $2.85 trillion at
the end of June, according to the Bank for International
Settlements -- a small sliver of the total $583 trillion OTC
swaps market.
 The largest broker of grain swaps cleared by CME Group
CME.O said the lower net worth requirement will make the
market more inclusive.
 "This is very positive for the marketplace," said John
Harangody, head of Atlas Grains.
 "I also think having a uniform set of rules for all of the
markets will simplify things and make it easier for ag
participants to understand," he told Reuters.
 Agricultural companies, farm groups and other major players
had urged the CFTC to remove the extra hurdles for their
swaps.
 Barclays Capital BARC.L, CME Group, Goldman Sachs GS.N,
Macquarie MQG.AX, INTL FCStone INTL.O, Cargill [CARG.UL],
Gavilon LLC, Land O'Lakes [LNDLKC.UL] and other farmer-owned
cooperatives all weighed in on the issue.
 CFTC IN "BUDGET CRISIS"
 The rules are part of the Dodd-Frank finance reform law,
which gives the CFTC oversight of over-the-counter
derivatives.
 The chronically underfunded agency has pulled out the stops
to try to meet deadlines to write its regulations, although
there are increasing signs it has fallen behind.
 The CFTC will hold another rule-making session next week.
[ID:nN19242420] It also slated meetings for Feb. 11 and 24, but
will announce topics later.
 It must still unveil two major rules: to more explicitly
define the types of swaps covered by all its new regulations,
and to establish capital and margin requirements for swap
dealers and major swap participants.
 Then, it will hold another series of votes to finalize all
the rules it has proposed.
 The agency has asked for a 50 percent hike in its budget
for the current year, but has not received it, and may face an
uphill battle as Congress looks for ways to cut government
spending.
 The CFTC does not have enough money to enforce the new
rules it is writing and faces a "budget crisis," said Michael
Dunn, a Democratic commissioner.
 "In essence, we face an unfunded mandate -- a situation
where the CFTC has been given enormous responsibilities,
without the corresponding increase in resources necessary to
fulfill them," Dunn said, noting the shortfall may result in
rules that are "detrimental" to the swaps industry.
 But a key Republican on the House Financial Services
committee, who backs spending cuts to bring down the
government's deficit, said the CFTC and other regulators are
not understaffed and should focus on writing their rules before
asking for more money for enforcing them.
 "Let's get the regulations right, first," said Scott
Garrett, who chairs the House subcommittee on capital markets
and government-sponsored enterprises.
 (Additional reporting by Christine Stebbins in Chicago, and
Christopher Doering and Andy Sullivan in Washington; Editing by
Russell Blinch and Lisa Shumaker)






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