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CFTC Chief Outlines Swaps Universe

More than 200 swaps dealers may be subject to regulation by the Commodity Futures Trading Commission, according to the CFTC chairman.
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) -- More than 200 swaps dealers may be subject to regulation by the Commodity Futures Trading Commission, said CFTC Chairman Gary Gensler at a swaps industry conference in New York Thursday.

Gensler cited the 209 "primary members" of the International Swaps and Derivatives Association (ISDA), the host of the conference and the main international trade group for swaps dealers.

"Under ISDA's bylaws, a firm is only eligible for primary member status if it deals in derivatives for purposes other than 'risk hedging or liability management,'" Gensler told the audience. "Though many of the dealers in emerging markets may not seek to register in the U.S., it is likely that most, if not all, of your global and international members would."

Under the Dodd-Frank Act passed earlier this year, the swaps dealers will be subject to capital and margin requirements, as well as other rules still to be written by the CFTC and other financial regulators.

ISDA's primary members include dominant swaps players such as

JPMorgan Chase

(JPM) - Get Free Report


Goldman Sachs

(GS) - Get Free Report



(C) - Get Free Report


Bank of America

(BAC) - Get Free Report

, as well as smaller international banks and a few midsized U.S. institutions. The list also includes securities firms such as Citadel Securities and


(JEF) - Get Free Report

, along with oil and gas giant


(COP) - Get Free Report


In addition to regulating the dealers, the CFTC will need to write rules governing swap execution facilities (SEFs), a new designation that is expected to be the preferred trading venue for standardized swaps. (Standardized swaps can also trade on exchanges under Dodd-Frank.) Gensler said he expects some 20 to 30 entities to register as SEFs or "designated contract markets."

Several entities, including Tradeweb, BGC Partners and MarketAxess, already have publicly signaled their intention to seek status as SEFs.

Standardized swaps must also go through a central clearing facility under the new laws, and Gensler estimated the number of registered clearing organizations will rise to 20 from 14 as a result.


Written by Dan Freed in New York


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