UPDATE: House Republicans Introduce Bill To Delay Derivatives Rules

House Republican lawmakers introduced legislation Friday to delay new derivatives regulations for 18 months following financial industry complaints that regulators are moving too quickly.

The bill pushes the deadline to December 2012 in order to synch U.S. and European regulatory efforts, House Financial Services Chairman Spencer Bachus (R., Ala.) said Friday in a statement.

"There is no need to rush and meet arbitrary deadlines when the rest of the world is at least 18 months behind the United States," Bachus said.

December 2012 is a deadline put forth by the Group of 20 industrialized nations to rein in the nearly $600 trillion over-the-counter derivatives market. The rule-writing has been moving more quickly in the U.S. because the Dodd-Frank financial law mandated regulators write the rules by July 2011.

"Without this legislation, the rulemaking process will be unnecessarily rushed--we are ensuring that regulators have enough time to get this right," Rep. Scott Garrett (R., N.J.) said in a statement.

Neither the Commodity Futures Trading Commission nor the Securities and Exchange Commission, which were tasked with erecting a new regulatory scheme for over-the-counter derivatives, have asked Congress to relax the deadlines.

But CFTC Chairman Gary Gensler has said his agency, charged with the bulk of the derivatives rule-writing, will not have all the rules in place by July. The SEC has pushed back the adoption of several key derivatives rules until later this year, according to a new schedule posted on its website.

CFTC Commissioner Bart Chilton, a Democrat, said the legislation wasn't necessary, arguing the rules need to be finalized promptly to prevent an opaque market from hurting the broader economy again. Bad bets on credit default swaps, a form of derivative, nearly toppled insurance giant American International Group Inc. (AIG) during the financial crisis.

"Hundreds of trillions of dollars in trading remain completely unregulated," Chilton said in a statement. "It is exactly this 'dark' trading that helped lead to a hideous bail-out paid for by taxpayers."

SEC spokesman John Nester declined to comment about the measure, but noted the two agencies will host a public meeting next month to discuss the timing of the rulemaking "with an emphasis on getting the derivatives rules right."

A CFTC spokesman declined to comment.

Large banks and other financial market players have pushed to delay the derivatives rules.

A top official of CME Group Inc. (CME), the largest U.S. futures exchange, complained about the Dodd-Frank law's deadlines in a hearing Wednesday. CME's Executive Chairman Terry Duffy said the law "left many important issues to be resolved by regulators with little or ambiguous direction and set unnecessarily tight deadlines on rulemakings by the agencies."

Republicans say the measure would erase legal uncertainty for companies the lawmakers say could arise if the rules aren't finished by the law's deadlines.

Rep. Mike Conaway (R., Texas), chairman of a House Agriculture subcommittee that oversees the commodities markets, said earlier Friday he was concerned companies could face lawsuits if they don't comply with the law's provisions, even if it they aren't in place by deadlines written in the law.

"It's during that interim period that the industry and market participants are subject to laws that are out there, but the regulations aren't written yet," Conaway said. The House Agriculture and Financial Services Panels share oversight of the implementation of the Dodd-Frank law.

Separately, House Democrats sent a letter to regulators Friday urging them to harmonize rules and coordinate with international regulators.

"Regulatory certainty is urgently needed in the markets, but it is just as important that the rulemaking process be thorough so that we end up with the right result," lawmakers said in the letter, signed by 24 house Democrats.

Rep. Gary Peters (D., Mich.), who signed the letter, said extending the deadline is not the solution.

"I don't support a delay, it's very important to put these regulations in place and have some certainty in these markets," Peters said.

-By Jamila Trindle, Dow Jones Newswires; 202-862-6684; jamila.trindle@dowjones.com

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