Commodity Futures Trading Commission Chairman Gary Gensler said the agency’s new regulations for the derivatives market must cover banks, non-banks and parts of the financial system that “pose new risks.”
“We must oversee a banking system, shadow banking system, derivatives marketplace and Wall Street,” Gensler said today in remarks prepared for a conference at Princeton University in New Jersey. “We don’t have the luxury to turn back the clock, but we do have the responsibility to update our oversight for the financial system of the time.”
The CFTC and the Securities and Exchange Commission are leading U.S. efforts to draft regulations for the $583 trillion over-the-counter derivatives market after largely unregulated trading complicated efforts to resolve the 2008 credit crisis. The new rules are required under the Dodd-Frank financial-regulation law enacted in July.
Gensler’s agency is planning three meetings in December to consider proposals for defining swaps dealers and other entities in swaps markets, he said on Nov. 19. The CFTC has already held five public meetings to consider and vote on proposed rules.
Derivatives, including swaps, are financial instruments used to hedge risks or for speculation. They’re derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates. Options and futures are the most common types of derivatives.