A Washington-based lobbying group representing agricultural and energy firms is pressing the U.S. Commodity Futures Trading Commission to stop Dodd-Frank Act rules for swap dealers from beginning to take effect next month.
The Commodity Markets Council, whose members include Bunge Ltd. (BG) and Cargill Inc., have filed a petition seeking a delay for non-bank dealers because the CFTC hasn’t completed other capital and collateral rules for firms that register. The agency should postpone the Oct. 12 start to registration, the group said.
“They seek to extend the registration requirement because, depending on the costs associated with operating as a regulated entity, which remain uncertain, they may simply choose to exit certain businesses in swaps,” Sanjeev Joshipura, president of the council, said in the petition submitted yesterday. “This would be an unfortunate outcome, given that it will further concentrate participation in the swaps market in the very institutions that Congress perceived to be the cause of the financial crisis in 2008.”
Steven Adamske, the CFTC’s spokesman, declined immediate comment.
The CFTC and Securities and Exchange Commission are working to complete regulations for the swaps markets after largely unregulated trades helped fuel the 2008 credit crisis and led to the U.S. rescue of American International Group Inc. (AIG) Swap dealers will face the highest capital, collateral and conduct regulations under rules completed by the agency that have yet to take effect.
The CFTC has estimated that 125 entities will become swap dealers, with Wall Street banks possibly registering multiple divisions. JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS), Bank of America Corp., Citigroup Inc. (C) and Morgan Stanley (MS) controlled 96 percent of cash and derivatives trading for U.S. bank holding companies as of March 31, according to the Office of the Comptroller of the Currency.
Companies must begin tallying their swap dealing trades on Oct. 12 to determine if they cross the $8 billion minimum threshold for registration. A company that crosses the threshold in mid-October will have until the end of the year to register with regulators.
“Commercial entities are not as prepared to be regulated in a ‘bank-like’ CFTC-regulated environment; they do not have nearly as much of the infrastructure already in place to meet the anticipated regulatory requirements; and they are not capitalized in the same way as a traditional financial intermediary,” the council said in its letter.
In addition to Bunge and Cargill, the council’s members include Virtu Financial LLC, an automated trading firm, and Louis Dreyfus Commodities LLC, according to the group’s website.
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