So it is perhaps unsurprising that players in the derivatives market want to thwart one of the worthier aims of the Dodd-Frank financial regulation: to bring transparency to the huge market for instruments known as swaps. Now some in Congress, on both sides of the aisle, are trying to block that goal, too.

Dodd-Frank focused on adding transparency to derivatives in a couple of ways. The area now under fire involves its directive that the Commodity Futures Trading Commission create rules to “promote pre-trade price transparency in the swaps market.”

The idea is that customers should get a clear picture of prices. Right now, many swaps are traded one-on-one, over the telephone. The price is usually whatever the dealer says it is.

When markets are opaque, the risks grow that problematic positions, like those that felled the American International Group in 2008, might once again create financial turmoil and spread through the system. Dodd-Frank sensibly asked that market participants provide trade and position details to regulators so this arena could be monitored better.

That mission has pretty much been accomplished. But a lack of transparency in the market as it relates to swaps customers hasn’t been addressed. And it is here that many on Wall Street, as well as some in Congress, are pushing back.

Opacity hurts customers because they can’t see a wide array of prices. But dealers can — so they have an edge that plumps up their profits. One estimate from the Swaps and Derivatives Market Association puts transaction costs in the swap markets at $50 billion annually. These costs would decline by $15 billion a year, the group recently estimated, if pricing were transparent.

The C.F.T.C. is trying to get there. Dodd-Frank requires it to oversee so-called swap execution facilities that will trade or process derivatives transactions. Late last year, in the interest of price transparency, the commission proposed that entities applying to be S.E.F.’s must agree to provide market participants with the ability to post prices on “a centralized electronic screen” that is widely accessible. One-to-one dealings by phone would no longer be allowed.

Those on Wall Street who favor the status quo are upset, and have found some sympathy in Washington.

Representative Scott Garrett , a New Jersey Republican, has teamed up with Representative Carolyn B. Maloney, a New York Democrat, to introduce the Swap Execution Facility Clarification Act. It would bar the Securities and Exchange Commission and the C.F.T.C. from requiring swap execution facilities to have a minimum number of participants or mandating displays of prices. Both mechanisms promote transparency.

Mr. Garrett said the bill directed regulators “to provide market participants with the flexibility” they need to obtain price discovery. This means maintaining the old system that can keep prices in the shadows.

On Nov. 15, a House subcommittee approved the bill by a voice vote.

Because Mr. Garrett opposed Dodd-Frank, his efforts to stop the proposed rule are not surprising. But Ms. Maloney supported Dodd-Frank, so I wondered why she had lent her name to the bill.

In an interview last Wednesday, Ms. Maloney said she had heard concerns about the C.F.T.C. rule from financial firms in her district. “I just felt like that Congress intended multiple competing trade execution platforms and that included voice,” she said. “If you say you can’t have any voice, aren’t you limiting the modes of trade execution?” She also said she was concerned about job losses on Wall Street.

Testifying in the House on Oct. 14 as a representative of the Wholesale Market Brokers Association was Shawn Bernardo, a senior managing director at Tullett Prebon, an institutional brokerage firm. Mr. Bernardo articulated the argument against screen-based trading that would show multiple bids and offers to swaps customers.

“Congress made clear in Dodd-Frank that S.E.F.’s may conduct business using, quote, ‘any means of interstate commerce,’ ” he said. That includes methods that don’t require a centralized pricing platform, he said.

Wall Street firms want to keep providing prices to customers one-to-one. The S.E.C., which governs credit default swaps on single-name issuers, allows the practice. But those markets trade by appointment, compared with most swaps markets, which are overseen by the C.F.T.C.

While many on Wall Street have objected to the C.F.T.C.’s proposed rule, swaps customers like it. The Industrial Energy Consumers of America, a group of manufacturers with combined annual sales of $800 billion, calls transparency in the swaps market “critical.” In a letter to the C.F.T.C. last May, the group urged the commission to be “vigilant in ensuring that swap execution facilities provide an open and competitive marketplace for discovering prices.”

Better Markets, a nonprofit organization that promotes the public interest in financial markets, has also praised the C.F.T.C.’s proposed rule. “It is painfully obvious that the financial crisis, which brought us to the brink of international economic collapse, was in large part the result of a ‘shadow’ or nontransparent financial market,” Dennis M. Kelleher, the chief executive of Better Markets, wrote in a comment letter. “The Dodd-Frank act requires that ‘business as usual’ must change.”

Not if Wall Street can help it. And it is throwing money at Washington to ensure that its views are heard.

IN an interview last week, Gary Gensler, the C.F.T.C. chairman, said he hoped to get the rule through early next year.

“Economists for decades have shown that transparency lowers margins, leads to greater liquidity and more competition in the marketplace,” Mr. Gensler said. “Tens of thousands of companies that use these products, and their customers, the American public, can benefit from more competition in the pricing of these contracts. Transparent pricing is also a critical feature of lowering the risk at the banks, and at the derivatives clearinghouses as well.”

But unenlightened investors can be mighty profitable. As Ferdinand Pecora, the Depression-era prosecutor, is supposed to have said of the events leading to the Wall Street crash of 1929: Pitch darkness was among the bankers’ stoutest allies.

Article source: http://feeds.nytimes.com/click.phdo?i=22e053313fd02878d1b058dca836d06a