In Congress the process of tweaking the DFA is occurring, SIFMA put out a warm “thanks” to the House of Representatives Finance Committee for agreeing and passing three amendments, which of course need approval by the full House and Senate to become effective.

The three bills are:

• HR 2586 (PDF): “SEF clarification act”: 1) NOT require a SEF to have a minimum number of bids 2) not require a SEF to display a bid/offer for a minimum period of time 3) not require a SEF for ‘inter state’ commerce 4) not require SEFs to inter-operate
• HR 2682 (PDF): “Non financial organisation exemptions: basically exempts non-financial institutions from DFA
• HR 2779 (PDF): “Affiliate clearing”: Exempt trades within a group (between controlled affiliates) from clearing

All of these are pretty big, 2586 would gut the whole impact of SEFs and return OTC trading back to a bilateral model, even if carried out on an electronic platform. 2779 is also a major relief for firms who have an entity structure with local affiliates around the world, and back trades into a central risk taking and management entity.

As I said above, these need to be put to a vote of the full House and Senate, to be approved, and change the rule making by the SEC or CFTC.