After the House and Senate worked out a compromise on the financial reform bill last week and that compromise passed the House yesterday, only the Senate remains as a hurdle to the bill's passage, and the bill could become law within the next few weeks. The legislation will mean many changes for traders, including requirements for clearing of OTC derivatives, with the new structure meaning changes in pricing and liquidity. And new restrictions on proprietary trading could cause larger traders to shift from banks to hedge funds, private equity firms or foreign firms.
The bill is only the first step in a longer rule-making process, as it gives the CFTC authority to sort out the specifics of the new rules. “If the CFTC sets requirements that are stringent, that could actually limit the amount of new participants to the marketplace,” says Kevin McPartland, senior analyst at Tabb Group. Some experts say it could take about a year for the full impact of the bill to be realized.