A key federal regulator said Thursday that he expects, in what would be a win for hedge funds and life insurers, only a small group of companies to be subject to the same new rules coming for swaps dealers.

Commodity Futures Trading Commission Chairman Gary Gensler said Congress intended that only those companies whose swaps positions pose a risk to the broader financial system be designated as "major swap participants" under the Dodd-Frank Act.

Hedge funds and life insurers have been lobbying federal regulators to dodge the label, which would subject them to the same margin and capital requirements as will be applied to swaps dealers.

A major swap participant "is what I would think would be a small group of entities," Gensler told reporters after speaking to a Practising Law Institute seminar in New York.

The Dodd-Frank financial reform aims to shine a light onto the opaque derivatives market and prevent participants from amassing too much risk.

The new regulatory scheme aims to move many swaps transactions onto trading platforms and route them through clearing houses, which guarantee trades. In addition, swaps dealers and large traders deemed "major swap participants" will be required to post collateral and hold more capital for swaps trades not processed through a clearing house.

The CFTC and the Securities and Exchange Commission are expected to spell out the criteria for "major swap participants" and "swap dealers" and for what counts as a "substantial position" in swaps. The terms, which will first be issued as proposals, will be crucial for determining which companies bear the brunt of the changes.

Hedge fund groups, in recent meetings and letters to regulators, have argued that most hedge funds' swaps positions are not a risk to the financial system. And the American Council of Life Insurers, in a recent letter to regulators, argued that their use of derivatives "is not unlike use by manufacturers seeking to ensure that they can lock in a fixed future price of key production input." Under the law, companies that use swaps to hedge commercial risk are exempted from the new capital and margin requirements.

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