A House committee will race to clean up new rules on swaps before they take effect, the panel's chairman said on Tuesday, warning the rules will harm small and medium-size businesses.

They believe they are going to be economically gut-shot on this ... a horrible, slow death, Agriculture Committee Chairman Frank Lucas said.

Lucas said there would be a number of bills from the Agriculture Committee, which oversees the Commodity Futures Trading Commission, the regulator of futures markets. The legislation could be introduced as soon as September.

He said the CFTC has failed to give enough leeway to end users, such as manufacturers, utilities and airlines, who use swaps to assure a supply of raw materials at a guaranteed price.

Many end users could be required to post cash reserves under CFTC rules although the Dodd-Frank financial reform law would exempt them -- we were clear about that and we need regulators to recognize congressional intent, said Lucas.

Other areas need intervention, he said, naming treatment of pension fund investments, definitions that could classify community banks as swaps dealers, public disclosure of swaps dealings and synchronization of U.S. and overseas rules.

The goal is to clean them up before they take effect, said Lucas.

CFTC Chairman Gary Gensler was scheduled to testify on Thursday before the Agriculture Committee at a hearing on the impact of derivatives reforms.

Dodd-Frank was enacted a year ago as a response to the 2007-2009 financial crisis. It brings the roughly $600 trillion global over-the-counter market in derivatives under regulation, requiring derivatives to go through clearinghouse and to trade on regulated exchanges as much as possible.

For months, Lucas has said the CFTC was rushing too fast to adopt Dodd-Frank rules and has not weighed the likely impact on small and medium-size businesses. Earlier this year, he filed a bill to delay the new rules by 18 months.

Separately, four members of the House Financial Services Committee unveiled a bill on Tuesday for more flexibility in how swaps are handled on regulated arenas. The CFTC and the Securities and Exchange Commission have proposed different rules for the swaps execution facilities (SEFs).

Sponsor Scott Garrett, a subcommittee chairman, said the bill would help ensure a vibrant U.S. swap market. The CFTC oversees most of the market, including interest-rate swaps, the biggest sector.

The bill would block regulators from specifying how many bids must be sought for a swap, require display of bids, spell out the medium for executing a transaction or require trading systems, such as request for quote and limit order book, to interact with each other at the same SEF.

Garrett said many swaps are sporadically priced and his bill would protect the confidentiality of trading strategies of asset dealers, pension funds and other market participants.

(Reporting by Charles Abbott; editing by Carol Bishopric)