Last minute proposals to U.S. legislation designed to reduce risks in the $450 trillion derivatives markets may limit competition among firms seeking to centrally clear contracts, a trade association said on Thursday.

This, in turn, would hurt the ability of clients to seek out the best prices when trading the contracts, said the Swaps and Derivatives Market Association, which comprises more than 20 U.S.-based broker-dealers and futures commission merchants.

Lawmakers are nearing completion of a historic overhaul of financial rules, with laws intended to regulate derivatives being among the most contested aspects of the bill.

Key to the reforms are requirements that the majority of privately traded derivatives be routed through central counterparties, which stand between trading partners and guarantee the trades, in order to reduce systemic risks posed by a large counterparty collapse.

Proposed amendments to the rules, however, may limit competition among firms seeking to clear contracts, the SDMA said.

In particular a proposal that clearinghouses not be forced to accept contracts from other clearinghouses would benefit exchanges that already dominate the business, at the expense of new entrants, it said.

The amendment was one of 110 changes proposed by the U.S. House of Representatives team negotiating derivatives to the financial reform bill on Wednesday.

The provision could be used by one clearing house, associated with one exchange or swap execution facility, to refuse acceptance of a trade initially executed on a competitor exchange or swap execution facility and cleared by a competitor clearing house, the SDMA said.

This would have the practical impact of restricting access to the best prices on identical derivatives contracts traded on different exchanges, it added.

Jared Seiberg, analyst at investment firm Concept Capital, said on Wednesday that the provision would benefit the CME Group, the world's biggest operator of futures exchanges.

This limit will tend to concentrate business at the biggest exchanges/clearing houses. That is why this is seen as a win for CME, Seiberg said.

The CME and the IntercontinentalExchange Inc are the only two exchanges to have begun clearing credit default swaps in the United States. Buyside participation has been limited by a small product choice as well as concerns about contract details and the protection of collateral backing the positions.

(Reporting by Karen Brettell; Additonal reporting by Roberta Rampton and Charles Abbott in Washington; Editing by Diane Craft)