Senate Committee on Banking: Discussion Draft of Financial Regulatory Reform

Senator Dodd (D-Conn) and 8 other Democratic members of the Senate Committee on Banking released an approximately 1,200 page draft proposal for financial regulatory reform yesterday.

All commodity swaps and options subject to US law are required to be submitted for clearing, with two exceptions:

1. No clearing organization will accept the swap or option for clearing
2. One of the parties to a trade is not a swap dealer or major swap participant AND is ineligible to use a clearing organization

A clause of the proposal addresses concerns that swaps or options could be customized to avoid clearing. The regulators would be authorized to adopt rules regarding attempts to evade the mandatory clearing requirement.

A discussion draft summary is available at http://banking.senate.gov/public/_files/FinancialReformDiscussionDraft111009.pdf while the full discussion draft text is available at http://banking.senate.gov/public/_files/AYO09D44_xml.pdf.

Consumer Hedge Tear Sheet: Nov 12