(New throughout, adds details about the rule proposal, commentsfrom SEC)
By Sarah N. Lynch
WASHINGTON, April 29 (Reuters) - U.S. regulators onWednesday re-proposed some rules targeting American and foreignswap dealers that run trading desks on U.S. soil, in a move toclarify which cross-border trades will be covered by certainU.S. regulations.
The Securities and Exchange Commission first floated theplan in 2013, but is now revising its draft in an effort tobetter tailor the rules to the highly illiquid derivativesmarkets it oversees.
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.
Under the plan, transactions between non-U.S. companies thatuse U.S. personnel to arrange, negotiate or execute swaps tradeswill be covered under several key SEC rules, but exempted fromothers such as mandatory clearing and trade execution rules.
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.
Under the SEC's plan, the trades in question will be subjectto business conduct standard rules and public trading datadissemination requirements.
The trades will also likely trigger banks to need toregister as dealers with the SEC, a status that will alsorequire them to post margin and set aside additional capital.
SEC Democratic Commissioner Luis Aguilar said he thinks thatthe plan will "prevent restructuring charades" to avoid SECrules. (Reporting by Sarah N. Lynch; Editing by Jonathan Oatis andDavid Gregorio)
Barclays (BARC)
