US legislation to force banks to spin out their swaps desks would raise costs for derivatives users and could disrupt cross-border business, according to Anthony Belchambers, chief executive of the Futures and Options Association.
The proposal was introduced by Senator Blanche Lincoln to the Senate’s financial reform bill, passed on May 20, and was a key point of contention in negotiations over the past few weeks to reconcile that bill with the equivalent legislation passed by the House of Representatives in December.
Lawmakers in Washington worked late into the night of Thursday June 24 hammering out a deal on the Lincoln proposals and other key disputed areas of the 2,000 page bill. By the end of the night it seemed clear that interest rate and foreign exchange swaps would be exempt from the spin-out requirement, which would apply to credit default swaps, commodities and dealings with speculative grade entities....