Goldman Sachs Group (GS), J.P. Morgan Chase and other firms may have until January to register swap-dealing units subject to the highest collateral and conduct standards under U.S. efforts to cut risk in the $648 trillion market.
The Commodity Futures Trading Commission set in motion a series of Dodd-Frank Act rules this week when it published a regulation effective Oct. 12 determining when trades will be considered swaps. Under a separate CFTC timetable, dealers may get until at least January to register.
Steven Adamske, the CFTC’s spokesman, declined to comment.
Societe Generale and lobby groups representing U.S. and international financial institutions have pressed the CFTC to delay registration of swap-dealing units. The main U.S. derivatives regulator is taking comments on a proposal for how the rules will apply to foreign-based banks and units of U.S. banks operating overseas.
Bank of America, Citigroup and J.P. Morgan have also urged the CFTC to change its guidance.
The agency estimated that 125 firms will register as swap dealers, which will face the highest standards for collateral, capital and conduct when trading with pension funds and cities. Dodd-Frank, the regulatory overhaul enacted in response to the 2008 credit crisis, includes provisions meant to reduce market risk after largely unregulated trades helped fuel a collapse that forced a U.S. bailout of American International Group.
Footnotes and details in a CFTC regulation published May 23 laid out a timetable for when and how firms must determine whether they meet the swap-dealer definition. Companies must first determine whether they do at least $8 billion in aggregate gross notional swap-dealing business with counterparties.
They must begin to aggregate trades starting Oct. 12, when the swap-definition rule takes effect. The firms then get two months from the end of the month they cross the $8 billion threshold to register as dealers. That means if a firm crosses the threshold in mid-October, they wouldn’t need to register until January, though they could choose to do so earlier.