CFTC Chairman Gary Gensler called the proposed rules "very good" and said they fulfilled a mandate in Congress requiring the agency to exempt certain firms from regulations. Some commissioners expressed frustration with the proposal, saying they hoped it would address more explicitly whether small banks and credit unions would be able to take advantage of the exemption.
The CFTC's proposed rules explain how companies can qualify for the exemption and what they must do to alert the agency if they decide not to clear their standard swaps. Mr. Gensler said a "long list" of these companies have come to the agency telling regulators Congress never intended the rules to capture them. Under the proposed rule, a swap must be used to hedge commercial risk. A swap is considered a hedge if it meets certain hedging rules defined in federal commodities laws or hedging accounting treatment under U.S. standards. 
A company must provide the CFTC with notice if it plans to take advantage of the clearing exception, filling out a computer form requiring them to check boxes in a drop-down menu. The form will contain questions about credit risk issues, such as whether the company has a credit-support agreement with its dealer. 
CFTC commissioner Scott O'Malia said he was "flummoxed" as to why the CFTC was opting at this point not to directly address exempting these smaller financial firms. "All we are going to do today, after almost five months with this language, is punt it," he said. 
The proposal by the Commodity Futures Trading Commission was approved in a 3-2 vote and will now be issued for public comment. A second vote is needed to implement it.