By Sarah N. Lynch
WASHINGTON, April 29 (Reuters) - U.S. regulators onWednesday were poised to re-propose certain rules targetingAmerican and foreign swap dealers that run trading desks on U.S.soil, in a move to clarify which cross-border trades will becovered by U.S. regulations.
The Securities and Exchange Commission first floated theplan in 2013 but was now re-proposing the measure.
The plan targets primarily large banks like Goldman SachsGroup Inc and Barclays Plc, which runderivatives trading desks on American soil.
In particular, it focuses on trades from these U.S.-baseddesks that are conducted with foreign firms, such as a CaymanIsland hedge fund, and then booked overseas with the banks'foreign affiliates.
Some critics have said that arranging such trades on U.S.soil while booking them abroad could create a loophole for banksto get around the rules. Others, meanwhile, say putting thesetrades under U.S. oversight is regulatory overreach.
The SEC's plan unveiled on Wednesday would covertransactions between non-U.S. companies that use U.S. personnelto arrange, negotiate or execute swaps trades.
The 2010 Dodd-Frank Wall Street reform law requires dealersto register with the SEC and the Commodity Futures TradingCommission (CFTC), with the SEC only overseeing a small subsetof the market involving derivatives whose values are pegged tosecurities such as credit-default or equity swaps.
There has been a brewing controversy over whether foreignbanks on U.S. soil that trade with other overseas clients shouldbe covered by American regulations.
The CFTC, which oversees the vast bulk of the market, faceda legal challenge from the industry after it tried to cast abroader net and cover such transactions.
A court upheld the CFTC's powers to impose the rulesoverseas but sent some of the measures back to the CFTC withinstructions to do a better job weighing their costs andbenefits on the market.
Deciding which trades are covered by U.S. rules is crucialbecause it could trigger a cascade of regulatory requirements.
Dealers who exceed, for instance, a certain threshold oftransactions per year must register with U.S. regulators. Otherrules that could get triggered include reforms requiring publicdissemination of all dealing activity and rules governing dealerconduct with clients.
SEC Democratic Commissioner Luis Aguilar said in preparedremarks on Wednesday that the plan will "prevent restructuringcharades" to avoid SEC rules. (Reporting by Sarah N. Lynch; Editing by Jonathan Oatis)
Barclays (BARC)
