Recall that Dodd-Frank set forth a July 16 deadline by which new rules--designed to move toward the central clearing of OTC derivatives trades--must be in effect. But it has been clear for some time now that the SEC was having trouble sticking to that timeline.

As expected, reality won out last week when the SEC voted to give itself a temporary reprieve. The specifics of this will be issued at a later date. The SEC will also offer a reprieve from other requirements that were not mandated by Dodd-Frank. The path toward better regulation and more safe clearing and settlement in the vast and active OTC derivatives market has been stop-and-go, with Wall Street lobbyists participating actively at every turn.

Lots of divisions points--pitting powerful Wall Street dealers versus upstarts, corporate hedgers versus speculators, big exchanges versus new swap execution facilities--have broken out, and it's obvious that this process is going to take some time. The SEC had not yet even formally proposed rules. So the only thing to do at this point is to pause and take stock.

You do have to wonder how long this delay will last. The SEC is facing a myriad of other tasks in a punishing budgetary environment. My sense is that we'll eventually get to clearinghouses, electronic trading, higher capital requirements and reasonable rules for non-speculators, but it will likely be on terms favorable to Wall Street dealers. The controversy over RFQ is a good example of how dogged the large dealers will be in defending their turf.

For more:
- here's an article from the Washington Post

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