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CFTC, SEC issue joint swaps definitions rules

Scott O’Malia

The Commodity Futures Trading Commission and the Securities and Exchange Commission jointly approved final rules on Wednesday that designate what firms will be subject to registration as swaps dealers.

In December 2010 the CFTC said that firms that trade more than $100 million in swaps over a 12 month period would be subject to increased capital and collateral requirements. The final rules issued this week, however, reset that threshold at $8 billion as part of an initial phase-in that eventually falls to $3 billion, according to Reuters.

Tyson Slocum, the director of Public Citizen’s Energy Program, a financial reform advocate group, expressed disappointment in the final rules.

“The $8 billion exemption level is far too high and far higher than was originally proposed last year,” Slocum said, Reuters reports. “I think this demonstrates the enormous lobbying effort of Wall Street and major energy and commodity companies that have been working to undermine Dodd-Frank.”

The CFTC estimates that approximately 125 firms would be required to register under the final rules, as opposed to 300 under the original rules. Once the definition of “swap” is issued, the CFTC said that designated firms would have 60 days to register with regulators.

Not all members of the CFTC, however, voted in favor of the final rules. Commissioner Scott O’Malia voted against the final rules, saying that the rule is flawed.

“I am unable to support this rule not because it fails to make positive policy choices, but because it undertakes several unnecessary and astonishing contortions to achieve those results,” O’Malia said, according to Reuters. “These contortions may lead to potentially adverse inconsistencies and instabilities in the years that follow.”

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