The swaps carve-out conundrum

Section 716 of the Dodd-Frank Act will force swap dealers to hive off certain derivatives businesses into separate affiliates. But the legislation is fiendishly complicated, riddled with oversights and requires daring interpretative leaps, which has left both bankers and their lawyers flummoxed. Matt Cameron reports

Former US president Harry Truman once said: “If you can’t convince them, confuse them.” US lawmakers appear to have done just that, passing a piece of legislation to regulate the over-the-counter derivatives markets last month that is so complicated, no-one yet understands how it will work. In fact, lawyers claim the legislation is peppered with ambiguities, has little logic behind it, and is likely to require numerous clarifications.

The nub of the matter is a controversial eight-page provision