By Douwe Miedema
WASHINGTON Feb 21 Commodities trader Cargill
Inc has registered as a swap dealer with the U.S.
derivatives regulator, a sign that new financial stability rules
have started affecting firms well outside Wall Street.
Cargill, one of the world's largest privately held firms,
is the first major non-financial company to acquire the status
of "swaps dealer" from the National Futures Association (NFA),
which lists the biggest players in the $630 trillion derivatives
So far, only large Wall Street firms had lined up with the
NFA after registration became mandatory at the beginning of the
year, such as JPMorgan, Bank of America and
Cargill said it had applied to be a swap dealer because
services its Cargill Risk Management unit provided had brought
it within the definitions of the law.
In 2009, the world's largest economies agreed to clamp down
on the unregulated swaps market, which has been blamed as a
major contributor to the global financial crisis, leading to
adoption of the Dodd-Frank law in the United States.
The U.S. Commodity Futures Trading Commission (CFTC) and
other regulators are setting tighter standards for trading and
data reporting, among a host of other measures. Firms dealing in
swaps must also register with the NFA.
Energy traders such as Royal Dutch Shell, Valero
and Chevron have so far been conspicuously
absent from the NFA's list, a sign of how the market is
dominated by investment banks.
That Minneapolis-based Cargill is the first to register
underscores its size: it buys, processes and distributes in
dozens of commodity markets, from cocoa and sugar to livestock,
grains and cotton.
Swap dealers need to become members of the NFA, a
self-regulatory body, and are audited on whether they comply
with the CFTC's rules, aimed at making derivatives markets less
susceptible to collapse.
Clearing houses will need to stand in between buyers and
sellers to limit the risk of a counterparty defaulting, and data
on swaps dealings need to be reported to regulators and in part
also to the general public.
A small group of companies that use swaps for genuine
hedging of physical assets such as commodities, or use them to
hedge financial liabilities in their daily business, is exempt
from the new rules.
But any other hitting a volume of more than $8 billion in
swaps in the past 12 months needed to register as of Dec. 31,
according to the CFTC's rules, with deadlines expiring at the
end of each calendar month.