Federal Reserve officials are on the lookout in case Wall Street banks try to devise more complex derivatives instruments aimed at circumventing new regulations.

Regulators are concerned that bank derivatives dealers could structure more over-the-counter derivatives to fall outside the definition of "standardized" transactions, which carry new rules under the Dodd-Frank Act for clearing and trading, said Theo Lubke, a senior vice president at the Federal Reserve Bank of New York.

"If it's viewed as more expensive to trade in that environment versus coming up with a contract that doesn't fit in that environment and is cheaper to trade, the incentive is to do that," he said at an event Friday held by the Federal Reserve Bank of Chicago.

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