By Brian Scheid

July 21 - US President Barack Obama on July 21 signed into law a sweeping financial sector reform bill that for the first time allows the government to regulate the over-the-counter derivatives market.

The act, which runs more than 2,300 pages and will form the basis of a massive rulemaking process over the next year, gives the US Commodity Futures Trading Commission and Securities and Exchange Commission oversight of the roughly $600 trillion OTC derivatives market and forces most swaps to be cleared on a regulated exchange.

Flanked by a number of congressional Democrats and administration officials, Obama said the new regulations would overhaul a financial system that "left abuse and excess unchecked," and led to the financial crisis.

The president said the bill will bring the "shadowy deals that caused this crisis into the light of day," and bring transparency to "complex and risky transactions." He said the legislation passed despite a "furious" lobbying campaign and an effort by Republicans to block it.

"Unless your business model depends on cutting corners or bilking your customers you've got nothing to fear from reform," Obama said.

The new law will also force the largest US banks to spin off much of their lucrative derivatives trading desks, including their businesses for energy swaps and agriculture commodities, and includes a version of the so-called Volcker rule, which bars banks from the majority of proprietary trading.

The law also creates a new consumer-protection agency, forces big banks to set aside more capital in case of another financial crisis, calls for more federal oversight of private equity and hedge funds and requires major changes for credit-rating agencies.

End-users, the term used to describe commercial hedgers such as energy producers and distributors, have raised concerns with the law, including fears they could be caught up in financial-entity definitions, which would negate their exemptions from clearing requirements, and could be hit by new, costly margin requirements.

CFTC Chairman Gary Gensler in a statement issued after the president signed the bill said the law will subject derivatives dealers to "robust oversight" for the first time.

"Standardized derivatives will be required to trade on open platforms and be submitted for clearing to central counterparties," Gensler said. "The commission looks forward to implementing the Dodd-Frank bill to lower risk, promote transparency and protect the American public."

CFTC Commissioner Bart Chilton added that the law will have a "tremendous benefit to markets and our economy."

"The unregulated OTC derivatives market and especially 'swaps' were a major component of the financial meltdown we experienced two years ago and are still living with today," Chilton said. "Bringing those trades out of the dark will go a long way toward keeping us out of another financial mess."

The new law is named the Dodd-Frank Act, after the legislation's chief architects: Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and House Financial Services Committee Chairman Barney, a Massachusetts Democrat.

Only three Republicans voted for the bill when it passed the House by a 237-192 vote on June 30 and only three Republicans voted for it when it passed the Senate by a 60-39 vote July 15.