CFTC Swap Plan May Save Billions in Bank Revenue

A revised proposal by the Commodity Futures Trading Commission for how private swaps can be traded will prevent dealers from losing billions of dollars in revenue, according to Moody's Investors Service analyst Alexander Yavorsky. The commission rewrote a prior attempt at the rule last week after Chairman Gary Gensler pulled the proposal from consideration at a Dec. 9 meeting. The original rule would have required dealers to provide executable prices to all market users of credit-default, interestrate and other swaps prior to any trade being done on an electronic system that mimics how futures exchanges operate. The revised rule proposal, passed by the CFTC in a 4-to-1 vote on Dec. 16, allows banks to show negotiable prices on a requestfor-quote, or RFQ, system that can be limited to a select number of trading partners.

Date December 21, 2010

Cross Reference (links require a Cabinet subscription) Dodd-Frank Act, Title VII, Sec. 723; CEA Sec. 2(h)(8)