Dodd-Frank’s first derivatives rule could be politicised

Author: Danielle Myles | Published: 15 Jul 2011

A rule designed to clamp down on manipulation and fraud in the futures and swaps market became the first substantive derivative rule passed under Dodd-Frank on July 7.

But it does not reflect the industry’s warning against lowering the scienter standard without offering guidance on what does and doesn’t constitute an offence.

Under the Commodity Futures Trading Commission’s (CFTC) rule, the regulator can now establish fraud-based manipulation by showing a trader acted recklessly, and without having to show that act had any price effect.

Previously it was necessary to prove the trader intended to affect a price and that this had an effect on the market.

US counsel are surprised the CFTC’s final rule is substantially the same as the proposed form....