CFTC, SEC votes on capital requirements for swaps firms
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) — Under pressure from Wall Street, energy companies and lawmakers on Capitol Hill, the nation’s commodity futures and securities regulators Wednesday approved rules that would require a smaller group of derivatives traders to set aside capital than they had originally considered.
At issue are rules the Commodity Futures Trading Commission and the Securities and Exchange Commission on identifying what traders will be designated as “swap dealers” and required to set aside more capital. The rules is required by the Dodd-Frank Act, written in response to the financial crisis of 2008.
The CFTC and SEC originally proposed that a derivatives trader would be subject to the rule if the firm’s annual notional amount of derivatives transactions exceeded $100 million.
However, the final rule approved by the CFTC Wednesday, by a vote of 4 to 1, exempts a much larger group of firms that engage in derivatives, exempting firms whose annual notional trading of derivatives is less than $3 billion. However, the rule won’t become effective until after a phase-in period of more than three years, and until then only firms with more than $8 billion in annual notional derivatives trading would be subject to it.
The agency left room to make changes to the rule after it collects two-and-a-half years of data on the industry and finishes a study on the subject.