April 04, 2012
Is The Interaffiliate Exception Bill The First Leak In Dodd-Frank?
Posted by David Zaring

The House justed exempted within firm swaps from Dodd-Frank's derivatives regulatory reform, and did so in a bi-partisan fashion.  I'm not sure how great it is to be permitting Barclays the New York investment bank to engage in currency trades with Barclays the British financial conglomerate.  But that's what the banks wanted, and that's what they got.  Jim Hamilton provides some legislative history detail:

H.R. 2779 preserves the important reforms of the over-the-counter swap markets enacted as part of Dodd-Frank while providing swap end users with an exemption that is responsive to their legitimate business needs for flexibility, risk management, and price stability. (Rep. Gwen Moore (D-WI), Cong. Rec. (Mar 26, 2012 p. 1550). Without the relief provided by HR 2779, companies would face the prospect of having to post double margins on swap trades: once on a swap trade with themselves and secondly when they trade outside...Rep. Scott Garrett (R-NJ) noted that under H.R. 2779 the inter-affiliate trades would be only exempt from costly margin, clearing, and real-time reporting requirements. Swap trades facing non-affiliated counterparties would still be subject to all the other regulatory requirements. (Cong Rec. (Mar 26, 2012) p. H 1549). 

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