CFTC Maneuvers Between Banks and Regulators

Andy Warhol said 'In the future, everybody will be famous for 15 minutes."

But today's banks are worried that 15 minutes is more than enough time to lose their competitive edge.

Commissioners from the US Commodity Futures Trading Commission (CFTC) will meet today to vote on the "real-time" reporting of block trades as part of the Dodd-Frank Act.

As BusinessWeek reports:

The commission voted 3-2 on Nov. 19, 2010 to propose a 15-minute delay for reporting the block trades of standardized swaps, meant as a window to give traders a chance to hedge the big trades prior to them going public.

Banks, through industry groups, argued that the proposal for a 15-minute limit wasn't enough time to protect them from competitors taking advantage of their need to hedge. Banks use hedging, which involves offsetting trades with opposite transactions, to shield themselves from losses.

During the comment phase of the proposal, some industry heads tried to argue that 15 minutes was a little too real time. BusinessWeek reports that the Federal Reserve Bank of NY felt that "Dealers may hold on to positions for days or weeks before hedging." With this in mind, regulators want to make this reporting as close to the trade as possible, which has caused the inevitable bank and exchange backlash.

In further CFTC rules, the agency has postponed the implementation of new rules governing derivatives. The new rules were to have taken place this past July but were pushed back to December 31, just 10 days from today.

The rules on these complex financial instruments will now take place in July 2012, two full years after the passage of Dodd-Frank.

The further weakening of Dodd-Frank marches on.