Only President Obama's signature is now required for the Act to become law.

Exactly how the Act will change financial services - and in particular derivative markets - is anyone's guess at present. It will be three or four years before many of the requirements are implemented, and wide scope is given for regulators to make policy to address the Act's overall aims. Some of these policies are only to be made once the regulators have conducted studies into the issues.
During that time market participants are sure to lobby for rules that suit them, and the political, economic and financial markets climates will also change.

Moreover, the lobbying and political battles that have already shaped the Act during its year-long process of formation have left it a twisted, convoluted thing, full of complexities and exceptions. This will give even more scope for regulators to influence the law's effects through the way they apply it, and for market participants to wriggle round its stipulations.

In what may be a hint of how the odds are stacked between the industry and the regulators, the Wall Street Journal reported this afternoon that the Commodity Futures Trading Commission had appointed 30 teams of staff to work on different aspects of the legislation, while JP Morgan Chase had set 100 teams to work. It also said the CFTC had asked for $25m more funding to address its new tasks.

Among the CFTC’s responsibilities – many of them to be discharged in cooperation with the Securities and Exchange Commission – will be:

- deciding which kinds of derivative should be subject to mandatory central clearing

- overseeing the over-the-counter market for the first time

- considering the findings of a six month study by the Financial Stability Oversight Council into how to implement the Volcker Rule (banning banks from proprietary trading), a limited version of which is in the Act, and then adopting rules to carry it out.

Philip McBride Johnson, a past chairman of the futures regulator, has pointed out that the CFTC and SEC have in the past struggled to agree on policymaking when charged to come up with joint rules by Congress.

Click here for FOW’s quick guide to the Act’s provisions on proprietary trading and banks’ swap desks.

Jon Hay +44 207 779 8372 jhay@fow.com