The U.S. futures regulator said on Wednesday it will unveil proposals defining which firms will be subject to higher capital and margin requirements as swap dealers and major swap participants at a public hearing set for December 1.
The rules will define who will be subject to more regulatory scrutiny from the Commodity Futures Trading Commission, which took control over the $600 trillion over-the-counter derivatives market in the Dodd-Frank financial reform law.
It will be the sixth such hearing for the CFTC, which is racing to release the first draft of its rules for the formerly opaque market by the end of the year so it can meet July deadlines set by Congress.
Apart from definitions for swaps dealers and major swap participants, the CFTC will also consider rules for exchanges and clearinghouses handling swaps and reporting and recordkeeping rules for dealers and major swap participants, the agency said.
At a separate public meeting on December 2, CFTC staff will discuss whether and how to put limits on algorithmic trading with prominent high-frequency traders and other market participants.
The CFTC received new powers to crack down on trading practices that disrupt markets in the Wall Street reform law.
It wants to use the public meeting and other comments it receives to give more definition to new bans on practices such as "banging the close" -- acquiring a big position to then offset it before trading ends -- and "spoofing", or making bids or offers but canceling them before execution.
The agency is looking at whether to go further and banning more acts that can roil markets, including practices used by high-frequency traders that some have argued contributed to the May 6 stock market "flash crash".
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