Government Regulator Crafts New Derivatives Rules With Outside Help

The Commodity Futures Trading Commission (CFTC) has been tasked, along with the Securities and Exchange Commission (SEC), with setting new rules governing the transparent trading of derivatives for the first time.
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The Commodity Futures Trading Commission (CFTC) has been tasked, along with the Securities and Exchange Commission (SEC), with setting new rules governing the transparent trading of derivatives for the first time.

On July 26, 2010, five days after President Barack Obama signed the most sweeping reform of the financial sector into law, the CFTC was already meeting with industry groups to hash out new rules for the trading of the complex financial instruments known as over-the-counter derivatives.

Disclosures made available under the CFTC's new policy of disclosing contacts made by outside organizations regarding the implementation of the Dodd-Frank financial reform bill show that the CFTC has held 192 meetings or discussions with outside groups since the bill was signed. The large proportion of these groups are those who will be most affected by new rules governing the trading of over-the-counter derivatives including major derivatives traders, clearinghouses and the industry groups that represent them. (View the database of contacts by clicking here or scroll to the bottom of this post.)

The market in derivatives, particularly those known as over-the-counter derivatives, is murky at best and the best source of information for the new regulators may be the very industry they are seeking to reign in. Two of the biggest banks to emerge from the 2008 financial meltdown were tied as the most frequent visitors to CFTC meetings as of October 6, 2010.

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