07/20/2010 05:12 am ET Updated May 25, 2011

Derivatives Reform: The Two Huge Loopholes Congress Is Fighting Over

We discussed two potential derivatives loopholes in the bill (One, Two), the first being about what constitutes a trading facility, and the second is what are the consequences for a derivative that doesn't follow the rules. This fight is over the second one. Cantwell has also introduced an amendment to tackle the first, but it looks unlikely that it will be up for a vote.

Over the weekend, Shahien Nasiripour had a writeup of this second derivatives loophole issue. Inside the second derivatives loophole issue is two issues, one being the penalties for not trading on a clearinghouse and the second being what if a clearinghouse turns down a derivative: