Controversial naked credit default swaps could be banned under the new law.
In a little-noticed provision, the new financial reform law, signed by President Barrack Obama last week, contains language that re-empowers the Commodity Futures Trading Commission to ban certain credit default swap contracts, reinstating powers that the Commodity Modernization Act stripped away in 2000.
A re-empowered CFTC could halt trading of existing credit default swaps in order to safeguard the public interest, a vague standard. It was unclear when the CFTC could exercise such sweeping powers.
"This ambiguity creates an uncertainty that makes the instrument very ineffective for hedging," said Ari Bergman, managing principal of Penso Advisors, which manages systemic