When the Dodd-Frank Act was still in the drafting phase, and was growing daily by thousands of words, I bet a friend in the publishing business (name withheld to protect the innocent) that I could reduce it to a single sentence. Here it is:

"All instruments known as 'swaps' are hereby declared to be contracts for future delivery if symmetrical payments are made between the parties based on changes in the benchmark's value, or to be options if one party commits to an agreed payment or action if a defined event occurs in exchange for one or more fee or premium, and subject to the Act's existing provisions except as may be exempted by the Commission."

This approach would save a forest of trees, eliminate massive compliance costs wrought by creating an entirely new regime for swaps, and leave the agency with flexibility to make exceptions where appropriate.

Congress chose to codify the myth that swaps are somehow "different" from futures and options that the Commodity Futures Trading Commission and its predecessors have regulated for generations. The result is massive new legislation that has spawned scores of new rules and regulations, many still being developed 2+ years later.

The CFTC never bought into this approach. In 1989, when swaps were largely confined to inter-bank interest rate deals, the agency issued a narrow "policy statement" allowing them to operate on an off-exchange, uncleared basis if limited in several ways.

In 1993, the CFTC converted that position into formal "exemptive" regulations. In 1989, as swaps migrated to other industries, the agency announced a review of its previous policy. Congress responded in 2000 by removing the CFTC's implicit authority to impose regulation on the swap community.

The 2008 financial crisis raised doubts about the 2000 legislation and led to the Dodd-Frank Act in the summer of 2010.

It is too late to reverse the new model for swaps. Even its beneficiaries, the swap community, have become alarmed by the complexity and potential cost of the current regime. An example of "Be careful what you wish for."

The Dodd-Frank Act's formal definition of a "swap" begins by treating virtually all options as swaps, then includes a description that seems to subsume most futures contracts as well.

This is important because Dodd-Frank allows commercial hedgers to avoid exchange trading, clearing and the minimum margin requirements imposed prudentially by the regulated markets.

My hunch is that a substantial part of swaps business will thus remain largely free from pesky regulation.

To confirm that swaps are really either futures or options, note that the New York Mercantile Exchange has offered for years a facility to clear swaps that simply converts them into "futures equivalents," and the IntercontinentalExchange has just announced a similar program. Such mechanisms simply would not work if there were not many swaps that are such in name only.

Maybe, if the new swap program does not work or more problems arise from its generous exceptions, we will turn again to a simpler model that folds swaps into the pre-existing Act and leaves the CFTC free to modify its policies for swaps that are truly different. But don't hold your breath.

Philip McBride Johnson is a former Chairman of the CFTC