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CFTC Delays Vote on Ownership, Governance Rules for Swaps Market

The U.S. Commodity Futures Trading Commission delayed a vote on rules that would limit bank ownership and control of clearinghouses and trading systems in the $583 trillion swaps market.

CFTC commissioners were scheduled to hold a final vote tomorrow on the Dodd-Frank Act regulations aimed at preventing conflicts of interest. “They will consider it at a different meeting,” Scott Schneider, a spokesman for the Washington-based agency, said today in a telephone interview.

The CFTC in October released a proposal for capping the ownership stakes that Wall Street banks and other swaps dealers can hold in clearinghouses, exchanges and so-called swap-execution facilities. Dodd-Frank, the regulatory overhaul enacted in July, directed the CFTC to reduce risk and boost transparency in the swaps market by having most swaps processed by clearinghouses and traded on exchanges.

The agency, required by Dodd-Frank to hold a final vote by mid-January, proposed a 20 percent cap on the ownership stake for any member of an exchange or swap-execution facility. The proposal didn’t include a limit on overall stakes.

The U.S. Justice Department, which has been investigating possible anticompetitive practices in the derivatives market, sent letters on Dec. 28 to the CFTC and the Securities and Exchange Commission urging “more stringent” regulations.

“Major dealers might use their control of a dominant trading platform to disadvantage rivals by refusing to trade their products or to continue trading over the counter even in instances where exchange trading is feasible,” wrote Christine A. Varney, assistant attorney general in the Justice Department’s antitrust division.

The Securities Industry and Financial Markets Association, International Swaps and Derivatives Association Inc., Financial Services Roundtable and three other associations representing banks and swaps dealers responded with letters to the CFTC and the U.S. Securities and Exchange Commission, urging them “in the strongest possible terms to forego the adoption of any aggregate ownership limits.”

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