The vote will send key lawmakers back to the negotiating table to hammer out a bipartisan compromise, with modified legislation expected to return to the Senate floor soon.
US President Barack Obama and the Democrats want to tighten the rules on banks and capital markets to prevent a repeat of the financial crisis, which tipped the economy into a severe recession and unleashed reform efforts worldwide.
Many Republicans say they see a need for reform, but oppose the Democrats’ bill as an overreach by the government.
The bill contained a number of provisions on the derivatives market, with key proposals suggesting that banks owning derivative operations would not be granted access to federal funding should they require it.
Senator Blanche Lincoln set out the proposals to the see the $450 trillion (£291 trillion) market further regulated.
The news comes as Democrats agreed to kill a provision from their derivatives bill yesterday which would have stopped regulators from requiring companies to hold collateral against their derivatives contracts.
It is understood that Warren Buffet, former chief executive officer and primary shareholder in Berkshire Hathaway, had been pushing for the wording in the bill that would protect him against having to pay out more than $60m (£38.7m) to secure the company’s derivative contracts.
Buffett is understood to have lobbied for rules to apply to new derivative contracts and not existing ones.