WASHINGTON – The Commodity Futures Exchange Commission this morning exempted all but a handful of credit unions from new rules on financial derivatives, clearing the way for NCUA to open the door later this year to greater use of interest rate swaps and options for a broader credit union market.

The CFTC’s rules, required under the Dodd-Frank Act, frees up end-users of derivatives under $10 billion in assets from the requirement that they route all of their trades through independent clearinghouses. The derivatives regulator estimates roughly 30,000 firms will qualify for the exemption.

The exemption comes as NCUA is preparing its own rules to expand the use of financial derivatives from a handful of carefully selected credit unions to a broad range of healthy credit unions. The agency has made it clear its rule, expected later this year, will be limited to interest rate hedges, like swaps, options and collars.

The new CFTC rules will require most derivatives to be traded on open platforms and routed through a clearinghouse that secures the deal and collects margin from both sides.

Commercial companies, banks and credit unions have lobbied to be excluded from these new requirements because posting margin to a clearinghouse will tie up money that could be used for other purposes.

Major Wall Street firms and banks dominate the derivatives market and have been widely expected to be captured in the swap dealer category. JPMorgan Chase, Bank of America, Citigroup, HSBC and Goldman Sachs control 96% of cash and derivatives trading for commercial banks and trust companies as of December 31, according to the Office of the Comptroller of the Currency.


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