A definition of swaps required by the Dodd-Frank Act and approved by U.S. regulators will bring government scrutiny to a $648 trillion global market that has been largely unchecked since it emerged three decades ago.
The U.S. Commodity Futures Trading Commission and Securities Exchange Commission, the agencies charged with overhauling financial regulation following the 2008 credit crisis, laid out for the first time when interest-rate, credit, commodity and other derivatives will be considered swaps. The designation approved yesterday activates rules to increase collateral requirements and bolster public trading of the products by companies such as JPMorgan Chase & Co., Goldman Sachs Group Inc. and Cargill Inc.
Within two months of the definition’s publication, swap dealers and so-called major swap participants must register; the CFTC estimates that 125 companies will be required to do so. JPMorgan, Goldman Sachs, Bank of America Corp., Citigroup Inc. and Morgan Stanley controlled 96 percent of cash and derivatives trading for U.S. bank holding companies as of March 31, according to the Office of the Comptroller of the Currency.