By Suzanne Cosgrove

Industry reaction to the Commodity Futures Trading Commission’s authorization of agricultural swap transactions and subjecting them to the same rules as other swaps transactions conjures up a line of a favorite Rolling Stones song:

"You can't always get what you want but if you try sometimes you just might find you get what you need." (Thanks to Mick Jagger, Keith Richards.)

In backing the final rule, CFTC Chairman Gensler noted the Dodd-Frank Wall Street Reform and Consumer Protection Act would prohibit over-the-counter ag swaps if the CFTC did not authorize them.

The new regulations subject swaps in agricultural commodities and all commodity options other than options on futures to the same rules as other swaps.

Public comments “overwhelmingly supported” treating agricultural swaps in the same way as other swaps under the Dodd-Frank Act, Gensler said in an Aug. 4 statement. The CFTC approved the measure.

Christine Cochran, president of the Commodity Markets Council, a Washington, D. C.-based trade association for the commodity futures exchanges and their industry counterparts, backed that view.

“We had asked for the CFTC to trade ag swaps the same as other swaps,” Cochran said in a phone interview. “We’re not alone in that ... it’s consistent with the public interest.”

A system of regulations are embedded within the Dodd-Frank Act and additional layers would be to the detriment of the market,” she said.

The National Grain and Feed Association agreed, issuing a statement that there was “more-than-ample protection in the swaps marketplace for both agricultural and non-agricultural swaps.”

Greater oversight of the $600-trillion OTC market is part of the broad Dodd-Frank Act, the U.S. legislation signed into law in July 2010 that was forged in response to the global financial crisis of 2008.

However, also on Aug. 4, the CFTC also finalized another Dodd-Frank rule on derivatives, which requires CFTC-registered swap data repositories, or SDRs to gather and store information from swap counter-parties and swap execution facilities. The rule seeks to increase market transparency and reduce systemic risk.

Some traders and industry insiders suggest this new degree of data reporting required under the new Dodd-Frank rule will be both costly and onerous.

The implementation of OTC derivatives market reform will cause data levels to surge, in both the U.S. and in Europe, the TABB Group said in research published on Aug. 15. The consultancy estimated that OTC derivatives market participants will spend $3.4 billion in 2011 on clearing and back-office technology alone.

How much of that will come from the agricultural sector because of the swaps rule is unclear.

“Ag swaps are a substantial part if the [OTC] market, but how substantial, we don’t know,” said Cochran. “Even talking to our members, some estimate the volumes at two times that of exchange-traded contracts, while others say it’s a fraction of ag contracts.”

Ironically, the new CFTC rules will help participants find out

“We’re kind of looking forward to learning the actual size of the market,” Cochran said.