December 2, 2010 / 4:24 PM / in 9 years

U.S. to decide on exemptions for FX swaps by July

NEW YORK (Reuters) - The U.S. Treasury intends to decide by July on whether to exempt foreign exchange swaps and forwards from new derivatives regulations that would require central clearing of those instruments, a Treasury official said on Thursday.

Michael Barr, assistant Treasury secretary for financial institutions, said the government is currently reviewing a number of “very thoughtful” comments made by the public on the new regulation, which some investors argue could increase systemic risks to the financial system.

“I anticipate that the secretary will make a determination

one way or the other on that in line with the CFTC’s process for the finalization of its rules, so the market will have certainty by that time and can view the framework as a whole,” he told investors at a Financial Times conference in New York.

The Commodity Futures Trading Commission is on track to finalize its new trading rules for the vast swaps market by the one-year anniversary of the Dodd-Frank law in July, he added.

The Dodd-Frank act gave U.S. Treasury Secretary Timothy Geithner the authority to decide whether the $53.1 trillion market for foreign exchange derivatives should receive an exemption from the new regulations.

The Treasury fought unsuccessfully to exclude foreign exchange from regulation under the new law. A decision by Geithner to grant an exemption would prompt sharp criticism from Democrats in Congress that he is creating a new loophole that defies the intent of the law.

Reporting by Walter Brandimarte; Editing by Kenneth Barry

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