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CFTC's Volcker Rule Roundtable Aims To Seek Insight On Exemptions

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PAUL VOLCKER
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* US CFTC to examine hedging, market-making exemptions

* Rule received new scrutiny since JPMorgan trading loss

* Sheila Bair, industry groups to appear at May 31 event

By Alexandra Alper

WASHINGTON, May 24 (Reuters) - The U.S. Commodity Futures Trading Commission said on Thursday it will host a roundtable next week to get more insight on how to craft key exemptions in the Volcker rule that would limit trading by government-insured banks.

The Volcker rule is part of the 2010 Dodd-Frank law aimed at preventing another financial crisis like the one that prompted government bank bailouts in 2008. Banks have lobbied regulators to carve out broad exemptions to the rule.

But support for broad exemptions has dried up in Washington since JPMorgan announced this month a trading loss of at least $2 billion on a botched hedging strategy. Since that announcement, potential losses have mounted.

The event scheduled for May 31 will include a panel of reform advocates, industry groups and former regulators, including Sheila Bair, the former chairman of the Federal Deposit Insurance Corporation and an outspoken critic of excessive Wall Street risk-taking.

"The roundtable will help the Commission by providing additional public input for the final rulemaking," the agency said in its announcement.

The current rule, first proposed by regulators in October, would ban banks that receive government backstops such as deposit insurance from trading for their own account. It includes key exemptions to allow banks to hedge risk and make markets for customers seeking to trade securities.

But new questions over the scope of those exemptions have been raised after JPMorgan, the largest U.S. bank, revealed that a faulty hedging strategy had generated a loss that could reach $5 billion.

"It's probably one of the more challenging jobs Congress has given the five regulatory agencies," CFTC Chairman Gary Gensler told CNBC on Thursday, noting that there is "overlap" between proprietary trading and hedging, which reduces risk.

The rule was slated to be finalized by July but regulators have indicated they will likely miss the deadline. Banks will have until 2014 to fully comply.

The roundtable will be open to the public.

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