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Legislative Updates: September 2009


Capitol Call

Although August is typically a slow month, last month the Treasury Department decided to send Congress the last piece of its regulatory overhaul proposal, which focused on the regulation of Over-the-Counter (OTC) Derivatives. The proposed legislation is designed to provide for regulation and transparency for all OTC derivatives transactions by moving the transactions onto exchanges, and creating exceptions for only the most customized contracts. Congress is expected to consider its own version of Treasury’s proposal when it reconvenes in September.

The SEC also chose the August recess to announce that it had reopened the comment period on its proposal to amend Regulation SHO. The agency wants more input on the proposed alternative uptick rule. Specifically, the Commission requested comments on the need for an options market-maker exemption.

Several groups, including SIFMA, supported the alternative uptick rule in the initial round of comments and the Commission now seems to be giving this approach to restricting short sales serious consideration. The Commission is also planning a roundtable later this month which will focus on securities lending, pre-borrowing, and possible additional short sale disclosures. With these developments, the Commissioners will not be able to vote on any final proposal until later this fall.

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