The U.S. swaps regulator is set to finalize this week a critical reform that will trigger banks and traders having to comply with costly new derivatives rules.
The Commodity Futures Trading Commission will vote on Tuesday on a definition of a "swap," which will start a countdown on compliance dates for big swaps players to start registering with regulators and reporting their trades.
Market watchers say this is a big step in regulators' efforts to bring the $650 trillion over-the-counter swaps market out of the shadows.
Widespread ignorance of swaps exposure at failed investment firm Lehman Brothers and insurer American International Group aggravated the 2007-2009 financial crisis, which led to billions of dollars in taxpayer bailouts.
The CFTC has struggled to keep pace with the rulemaking timetable laid out in the 2010 Dodd-Frank financial reform law, and it has been criticized for moving ahead on rules that lay out requirements for swap dealers before even defining a swap.
The CFTC is expected to vote unanimously to finalize a swap definition that closely follows what is laid out in Dodd-Frank. Gabe Rosenberg, an attorney at Davis Polk, called it a "critical moment for the industry."