Wall Street Asks Agencies to Slow Down on New Derivatives Rules
Eleven financial-industry trade associations representing Wall Street banks, hedge funds, swaps dealers are asking federal regulators writing new derivatives rules to slow down.
In a letter sent to the Commodity Futures Trading Commission and the Securities and Exchange Commission, the groups called for extending public comment periods on some regulatory proposals and said firms should be given more time to implement new directives.
“We are concerned that market participants will be asked to do too much in too short a time,” the groups wrote in the letter sent yesterday. “This could have significant adverse consequences for the customers that rely on these products.”
The agencies have begun writing hundreds of rules arising from the Dodd-Frank regulatory overhaul legislation that became law in July. The effort is designed to increase transparency in the derivatives industry, including bringing additional firms under CFTC oversight and requiring most trades to be cleared or traded on an exchange.
Derivatives are financial contracts whose value is derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in interest rates or the weather. Trading in derivatives has been blamed for helping trigger the 2008 financial crisis.
July Deadline
While the federal agencies have some leeway in writing the rules, the law requires most of the rulemaking to be completed by July. John Nester, an SEC spokesman, declined to comment; Scott Schneider, a spokesman for the CFTC, didn’t return a call seeking comment.
The associations signing the Dec. 6 letter include the Securities Industry and Financial Markets Association, the American Bankers Association, the Futures Industry Association, the Financial Services Forum and representatives for the hedge- fund and mutual-fund industries.
The groups complained that the agencies were moving forward on rules without first completing the legal definitions that will determine who is affected -- an issue raised by the two Republican CFTC commissioners at a public meeting last month.
For example, the CFTC issued proposed rules in November that concern regulation of swaps dealers and major swap participants. Several weeks later in December, the agency proposed rules for deciding which firms would be considered a “swap dealer” and which would be a “major swap participant.”
The trade groups also warned the agencies that the flood of new regulations makes it likely that the industry will need more time to comply with the law.
“We urge regulators to take into account the practical realities facing market participants and to phase in the application of new regulatory requirements over a reasonable period of time,” the groups wrote.
To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net
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