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Hedge Funds May Skirt Trade Rules With Banks’ Aid, Gensler Says

BusinessWeek – Banks may be helping hedge funds avoid rules meant to reduce market risks by routing trades through overseas offices, the top U.S. derivatives regulator said in testimony prepared for a hearing on the Dodd-Frank Act.

Overseas affiliates of the banks may be conducting trades with hedge funds that are organized offshore even though their principal place of business is the U.S., Commodity Futures Trading Commission chairman Gary Gensler said in a statement for tomorrow’s Senate Banking Committee hearing. The effort may be used to avoid rules, taking effect in March, requiring trades to be guaranteed at central clearinghouses.

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