The Commodity Futures Trading Commission unanimously decided Thursday to allow exchanges to begin listing swaps contracts, while extending relief on other rules governing the derivatives market until December 31.
Swaps, traditionally traded over-the-counter (OTC) and therefore notoriously opaque, will be transformed by the change. “When markets are open and transparent, prices are more competitive, markets are more efficient and liquid, and costs are lowered for companies and their customers,” CFTC Chairman Gary Gensler said.
Among other provisions of the new rule, exchanges will be required to suspend trading when volatility reaches a certain level in order to prevent major market disruptions.
While moving ahead on this front, the CFTC bowed to intense industry pressure on other provisions, most notably the so-called 85 percent rule, which would have forced exchanges to delist new derivatives unless 85 percent of the contracts were exchange traded. The rule had been opposed by Republican commissioner Scott O’Malia, who said he was pleased that the commission had decided to reconsider the rule.
