Goldman Sachs, BP Met With Derivative Regulators on Dodd-Frank
Goldman Sachs Group Inc., BP Plc and Vitol Group number among dozens of companies that have met with the top U.S. commodity regulator in the last six weeks as the agency moves to implement the sweeping overhaul of the $615 trillion over-the-counter derivatives market.
The Commodity Futures Trading Commission is drafting 30 sets of rules after enactment of the Dodd-Frank financial bill. The commission is charged with, among other things, imposing limits on the number of contracts a single trader can hold, setting margin requirements and deciding which trades will be processed, or cleared, through third-party clearinghouses.
“This commitment to open government will help promote the integrity of the rule-writing process,” said CFTC Chairman Gary Gensler in a statement.
President Barack Obama signed the Dodd-Frank bill into law on July 21, setting off the first round of lobbying and rule- writing inside U.S. regulatory agencies. Along with a new regulatory structure for derivative markets, the law also creates a new agency to monitor consumer financial products and a council of regulators to oversee systemic risks.
The CFTC has met with banks including Goldman Sachs and JP Morgan Chase & Co., airlines such as Delta Air Lines Inc. and JetBlue Airways, power companies including Exelon Corp. and NextEra Energy Inc., and oil and natural gas producers including BP and Hess Corp., according to the CFTC Web site.
JPMorgan Executive
Blythe Masters, JPMorgan’s head of commodities, came in for a meeting on Aug. 11 to discuss, among other issues, how regulators would define things like “major swap participant” and “swap dealer.” Those definitions will dictate which firms fall under the regulatory umbrella.
Jeremy Barnum, a managing director in the bank’s global fixed-income group and the chairman of the firm’s market- structure group, also attended the meeting with Dan Berkovitz, the CFTC’s general counsel, according to the Web site. Barnum, in June, was tasked by JPMorgan with helping the company adapt to the new derivatives and clearing rules implemented by Congress.
The commission is an independent agency that regulates the U.S. commodity future and option markets, including markets in raw materials like wheat, corn, oil and natural gas.
The CFTC and other regulatory agencies including the Securities and Exchange Commission, Federal Reserve and the Federal Deposit Insurance Corp. have pledged to post the names of banks and other lobbyists who come in for meetings on the implementation of the law. The legislation is named for its sponsors Senator Christopher Dodd, a Connecticut Democrat, and Representative Barney Frank, a Massachusetts Democrat.
Derivatives are financial instruments based on the value of another security or benchmark. Some instruments, including contracts that insured mortgage-backed bonds, have been blamed for fueling a financial crisis that led to the worst recession since the Great Depression.
To contact the reporter on this story: Asjylyn Loder in New York at aloder@bloomberg.net. Phil Mattingly in Washington at pmattingly@bloomberg.net.
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