(Reuters) – The U.S. derivatives regulator on Wednesday approved a final rule for safety margins on uncleared swaps, part of its efforts to drive down excessive risk-taking in the $710 trillion global market.
In a 2-1 vote, the Commodity Futures Trading Commission endorsed the rule for those swaps that are traded outside of clearing houses.
“While there are costs to this rule, they are justified in light of the potential risks that uncleared swaps can pose,” said CFTC Chairman Timothy Massad, adding that it focuses “on those entities that create the greatest risks to our system through uncleared swaps: the large financial institutions with the greatest amount of swap activity.”
The rule, part of the Dodd-Frank reform law passed in 2010, is intended to require adequate collateral for covering positions in deals and to create margin requirements high enough to curb firms’ abilities to take on large risks.
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