Bloomberg News

CFTC to Propose Foreign Swap Reach Rules in 2012, O’Malia Says

December 07, 2011

Nov. 30 (Bloomberg) -- The U.S. Commodity Futures Trading Commission next year will propose regulations that govern the international reach of Dodd-Frank Act rules for the $708 trillion swaps market, said Scott O’Malia, a commission member.

The over-the-counter “derivatives industry is global and defining where United States jurisdiction starts and ends will involve considerable debate,” O’Malia, a Republican, said in a speech prepared for a Futures Industry Association conference held in Singapore.

Wall Street’s largest swap dealers have lobbied the CFTC and Securities and Exchange Commission to restrict the reach of Dodd-Frank rules so their foreign-based subsidiaries aren’t put at a disadvantage compared with overseas rivals who don’t fall under U.S. law.

Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co., among other firms, said in a June 29 letter that proposed Dodd-Frank regulations threaten to “damage the competitiveness” of the foreign-based business of U.S. banks. Dodd-Frank, enacted in July 2010, aims to reduce risk and boost transparency in the swaps market after largely unregulated transactions helped fuel the 2008 credit crisis.

The banks have argued that proposed regulations for margin, or collateral, in non-cleared trades will encourage customers to do business with overseas firms. International regulators, including the Basel Committee on Banking Supervision, are planning to publish a document for common margin requirements in non-cleared trades by the middle of next year, O’Malia said.

International agreement on margin standards is “nascent,” O’Malia said.

--Editors: Lawrence Roberts, Gregory Mott

To contact the reporter on this story: Silla Brush in Washington at sbrush@bloomberg.net.

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net


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