WASHINGTON -- A final Senate vote on legislation that would eliminate uncertainty about the trading of swaps in the U.S. was delayed yesterday until at least tomorrow when two senators halted action on pending tax and water bills.

Sen. Alfonse D'Amato, R-N.Y., and Sen. John Seymour, R-Calif., used various delaying tactics to tie up the Senate for nearly 20 hours until the beginning of Yom Kippur. The Senate agreed to continue debate during the holiday but out of courtesy to Jewish lawmakers was unlikely to hold any votes.

The delay forced the Senate to return tomorrow to try again to dispose of several remaining bills before adjourning for the year. That includes the swaps measure, which was hammered out by a joint House and Senate panel in late September.

Senate approval would clear the bill for President Bush's signature because the House approved the compromise swaps bill last Friday.

"It's very likely that the Senate will get to the bill [even though] the bill has had a controversial history," said a Senate aide. "At this point, a broad consensus is behind it," he added, noting that congressional committees have been working on swaps legislation for over three years.

Currently, swaps and other derivatives are exempt from regulation by the Commodity Futures Trading Commission, the federal agency that oversees the futures markets. That exemption has left the rapidly growing derivatives markets open to court cases charging that the products are trading illegally outside of futures exchanges.

The pending bill would allow the futures commission for the first time to issue exemptions from agency rules on a case-by-case basis for swap products, which the agency is expected to do quickly if a bill is enacted.

To be eligible for exemption under the bill, an applicant would have to show that trading in the product was limited to sophisticated participants that could meet minimum financial strength requirements.

In a compromise provision, however, the bill gives futures exchanges the green light to enter the swaps business. Exchanges have been concerned about growing competition from swaps dealers.

The legislation would apply to municipal swaps, forwards, and other products as well as to their corporate counterparts, congressional aides say.

"Courts will not be able to call into question the substantial financial commitments that exist under swaps agreements on the grounds that they are unenforceable, off-exchange futures contracts," said Mark C. Brickell, a vice president at J.P. Morgan & Co. and a director of the International Swap Dealers Association, in a statement.

A market source said swaps face three types of risks; market risk stemming from trading, risks involving the credit quality of counterparties to deals, and legal risks. The pending bill addresses legal risks, he said.

The bill grants the new authority for only two years and authorizes several studies of activity in the area during that period.

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