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January 15, 2015

SEC Approves Rules Requiring Public Reporting of Swap Trades

“U.S. regulators adopted rules that will require most swaps trades to be publicly reported, a response to lax derivatives oversight in the run-up to the credit crisis.

“The rules approved today by the Securities and Exchange Commission call for an interim period during which all swaps must be reported to public databases within 24 hours. Regulators said the requirements could change as they study how the reporting affects the cost and ability of banks and other firms to make large trades.

“The regulations are the latest step in efforts by the SEC and Commodity Futures Trading Commission to boost transparency in the swaps market. They come more than six years after the collapse of Lehman Brothers Holdings Inc. and government rescue of American International Group Inc. (AIG), which was partly rooted in unregulated swaps.

“By creating a record of swaps trades, regulators aim to monitor for systemic risk while giving investors a better idea of fair prices.”

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“The CFTC has already approved rules that require dealers and other investors to provide price, volume and other information to the databases and the public.

“Banks have lobbied for reporting delays for large trades, saying that immediate transparency will increase trading costs because other traders can detect the large demand and front-run their orders. The rules approved today don’t define what qualifies as a large trade, which the SEC said it would continue to study.

“SEC Commissioner Luis Aguilar, a Democrat, said he hoped the reporting delay will eventually be shortened.

“Dennis Kelleher, chief executive officer of Better Markets, which advocates for more stringent financial regulation, said “a 24-hour trade reporting delay is a 19th-century, horse-and-buggy standard for 21st century markets that move faster than the speed of light.”

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Read the full Bloomberg article by Dave Michaels and Silla Brush here.

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