WASHINGTON - The massive derivatives report issued this week by Rep. Jim Leach, the top Republican on the House Banking Committee, has drawn mixed reactions from federal regulatory and industry officials.

While some federal officials praised the Iowa congressman's report as an important contribution to the derivatives debate, other regulators and derivatives industry experts said it is too far-reaching and could stifle the derivatives markets.

The 900-page report contains 30 recommendations for federal regulators.

The major theme is that an interagency commission should be formed to develop uniform rules for derivatives products, dealers, and end users. Leach has said he is incorporating this proposal into a bill that could be introduced early next year.

The report contains many more specific recommendations as well. One that could affect the municipal derivatives market suggests that regulators establish "minimum prudential practices" for municipalities and pension funds that use derivatives products.

The International Swaps and Derivatives Association released a statement saying the recommendations, if adopled, "could change the structure and reduce the risk management benefits that derivatives offer to corporations and financial institutions."

The association said the report contains "inaccurate characterizations of the derivatives business."

Other industry officials and one federal regulatory official who did not want to be named criticized the report for attempting to micro-manage derivatives market participants.

But both proponents and critics pointed out that the Leach report is only the first shot across the bow for derivatives.

Rep. John Dingell, D-Mich., chairman of the House Energy and Commerce Committee, is expected to hold hearings early next year after the General Accounting Office completes a report on derivatives for the committee.

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