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Hedge Funds, Banks Avoid New Derivatives Rules

U.S. securities regulators on Wednesday finalized long-awaited rulesthat will dictate which companies dealing in derivatives will be subject to costly capital, margin and business conduct requirements.

NYSE traders
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NYSE traders

The new rules will affect any company that manages more than $8 billion of derivative swaps. That means hedge funds and big banks that manage less than that will be exemptfrom regulatory oversight.

The Securities and Exchange Commission adopted the rules in a 5-0 vote. The rules are a main provision in the Dodd-Frank Wall Street reform law, which gave the SEC and Commodity Futures Trading Commission broad new authority to regulate the $700 trillion over-the-counter derivatives market.

The CFTC is also slated to finalize the rules on Wednesday. SEC Chairman Mary Schapiro said the final rule aims to only capture the companies that truly deal in derivatives, sparing mutual funds and pension funds from the new regulations.

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