CFTC handling of energy swaps rules a 'train wreck'-O'Malia

CHICAGO, Oct 31 (Reuters) - One of five policymakers on the U.S. Commodity Futures Trading Commission said on Wednesday that the CFTC fell down on the job earlier this month as it imposed, and then suspended, a key rule governing energy derivatives.

The U.S. futures regulator waited until about 3 p.m. on Oct 12, a Friday, before granting a reprieve to CME Group Inc and big energy traders on new rules that could have meant sharply higher costs had they taken effect as planned, on the following Monday.

``You could hear the squeal of tires and then the scrunch of metal,'' Scott O'Malia, a CFTC commissioner, told an annual futures industry meeting in Chicago on Wednesday.

O'Malia has sometimes been a sharp critic of the CFTC implementation of Wall Street reform legislation, steered by CFTC Chairman Gary Gensler. ``It was just a train wreck,'' he said of that afternoon.

The CFTC gave market participants until the end of the year before counting their energy swaps toward an $8 billion yearly trading threshold that would trigger higher capital requirements.

It also approved rules that CME wanted to smoothly transition energy swaps into futures bought and sold on its electronic trading platform.

Energy swaps users had gotten conflicting information about whether those swaps would be counted starting on Oct. 15, and despite repeated requests the CFTC did not clarify its view until it gave its last-minute reprieve.

Gensler had been scheduled to address the same group earlier Wednesday, but monster storm Sandy kept him from attending.

(Reporting by Ann Saphir; Editing by David Gregorio)