CFTC Adopts Rules to Expose ‘Dark Market’

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The U.S. Commodity Futures Trading Commission (CFTC) approved rules and regulations to govern information databases.    The rules apply to companies at the center of the $601 trillion swaps market.

Enacted in July 2010, Dodd-Frank Act focused to reducing risk and boosting transparency in the swaps market after largely unregulated transactions helped increase the 2008 credit crisis.   Private derivatives contracts complicated efforts to resolve the crisis by making it difficult for regulators to unravel trading links among financial firms after the September 2008 collapse of Lehman Brothers Holdings Inc.

As the result, part of a Dodd-Frank required that all transactions must be reported to swap data repositories that will make information on trading volumes and prices available to financial regulators.    

Further, Dodd-Frank law required the CFTC and Securities and Exchange Commission to write rules that will govern trades conducted by financial firms, as well as energy and commodity firms.

According to CFTC commissioner, Bart Chilton, the markets covered by the rule used to be called “dark markets for swaps trading” and the databases will provide transparency and information-sharing with overseas regulators.

The database rules are the first in a series that will determine registration requirements for market participants such as swap dealers, major swap participants, end-users and clearinghouses.     CFTC commissioners voted 4-1 yesterday to adopt a rule registering the databases.

Anna Timone (195 Posts)

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