Chambliss drafts substitute derivatives legislation

Sen. Saxby Chambliss (R-Ga.) is circulating a 220-page bill substituting Democratic efforts to overhaul regulations of the multitrillion-dollar derivatives market.

The bill would be an amendment to the Wall Street overhaul effort now pending in the Senate. Chambliss had been negotiating with Senate Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.) prior to committee debate in April.

Lincoln moved to introduce her own legislation, which has since largely been incorporated into broader legislation by Senate Banking Committee Chairman Chris Dodd (D-Conn.). Lincoln's bill has drawn little Republican support, although Sen. Charles Grassley (R-Iowa) supported it in committee debate.

The Chambliss language has many differences with the Democratic bill. For example, a "swaps end user" has a broader defintion. An end user is defined as any person whose gross notional derivatives -- not including "bona fide hedging swaps" -- represent 5 percent or less of outstanding swaps and 7 percent or less of outstanding swaps and security-based swaps.

A bona fide swap is one that, "is economically appropriate to the reduction or offsetting of risks."