Firms such as JPMorgan Chase & Co. and Morgan Stanley wouldn’t have to set aside as much money in trades between their own divisions in the final version of a rule U.S. regulators may release as soon as next month, said two people familiar with the discussions. After months of disagreement, the agencies, which include the Federal Deposit Insurance Corp. and Federal Reserve, decided to ease the demands of an earlier version of the proposal, according to the people.

The industry had fought the mandate that both a bank and an affiliate put up collateral, which was laid out in the version of the rule that was proposed last September and had strong support from the FDIC. In a compromise, banking regulators now agree that the final measure should only demand collateral from an affiliate trading with a U.S. bank unit, said the people, who requested anonymity because the rule hasn’t been released publicly.

That means the U.S. banking divisions of the biggest swaps dealers, such as Citigroup Inc., Goldman Sachs Group Inc., JPMorgan, Bank of America Corp. and Morgan Stanley wouldn’t have to pledge collateral to offset risks from non-cleared swaps with their overseas affiliates, such as a U.K. brokerage.

Eoin Treacy's view

The financial sector spends a great deal of money on lobbying; often to good effect. Securing the ability to put up less collateral for trades between subsidiaries would appear to be a sensible outcome. However the market is not particularly focused on such a small issue at present. Just how exposed the financial sector is to emerging market borrowers whose domestic currencies are sinking would be a more relevant question right now. 

The S&P Diversified Financials Index has been leading on the downside and moved to a new reaction lows today. A clear upward dynamic would be required to signal a failed downside break, but a sustained move above 475 would be needed to begin to question the medium-term downward bias.