Swap Vote to Trigger New Rules

Regulators’ decision this week on how to define a swap will trigger a cascade of Dodd-Frank changes.

When they decide which derivatives are considered swaps under the Dodd-Frank Act, U.S. regulators will unleash a cascade of rules on the $648 trillion global market designed to prevent a repeat of the 2008 credit crisis.

The Commodity Futures Trading Commission is poised to complete several hundred pages of regulations tomorrow that determine when trades by JPMorgan Chase & Co., Goldman Sachs Group Inc., Cargill Inc. and other companies must fall under rules to reduce risk and increase transparency. The Securities and Exchange Commission unanimously approved the rule July 6 without holding a public meeting.

Conduct Standards

Regulations governing conduct standards between banks and swap-buyers, internal standards for chief compliance officers and registration for swap-data repositories are also pegged to the final definition vote. Rules for agricultural swaps and commodity options also rely on the swap definition.

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