House Republicans Ask CFTC Watchdog to Probe Dodd-Frank Costs

U.S. House Republicans have asked the Commodity Futures Trading Commission’s internal watchdog to ensure Dodd-Frank Act rules for derivatives markets are cost-effective and don’t impose unnecessary burdens on companies.

Representatives Frank Lucas of Oklahoma and K. Michael Conaway of Texas want CFTC Inspector General A. Roy Lavik to review how the agency assesses costs and benefits, and whether rulemaking might be helped by extension of the mid-July deadline for Dodd-Frank Act provisions, they wrote in a March 11 letter. Lucas and Conaway asked Lavik to reply by April 15.

“It is incumbent upon the CFTC to approach cost-benefit thoroughly and responsibly to understand the costs, and therefore the economic impact any proposed regulation will have on regulated entities and markets,” the lawmakers wrote. Scott Schneider, a CFTC spokesman, declined to comment on the letter.

The CFTC and Securities and Exchange Commission are writing rules for derivatives markets after unregulated trades helped fuel the 2008 credit crisis. Dodd-Frank, passed by a Democrat-led Congress and enacted in July, seeks to reduce risk and boost transparency in the market by having most swaps guaranteed by clearinghouses and traded on exchanges or other platforms.

The letter from Conaway and Lucas, the chairman of the House Agriculture Committee, follows calls from financial-industry lobbying groups and Republicans including CFTC Commissioner Jill Sommers to increase scrutiny of the costs and benefits of the new regulations.

Terrence Duffy, executive chairman of CME Group Inc., said the CFTC is “operating under the mistaken interpretation” that the agency doesn’t need to analyze the financial impact of regulation.

“The drafters of the proposed rules have consistently ignored the commission’s obligation to fully analyze the costs imposed on third parties and on the agency,” Duffy told lawmakers at a Senate Agriculture Committee hearing on March 3.

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