The inability of U.S. regulators to agree on guidelines for the international reach of the Dodd-Frank Act may disrupt the $708 trillion global swaps market, said Jill E. Sommers, a Republican member of the Commodity Futures Trading Commission.
“I’m deeply concerned that there has not been adequate coordination” with the U.S. Securities and Exchange Commission and non-U.S. regulators, she said today in a speech at an Institute of International Bankers conference in Washington. “Of even greater concern to me is that the commission appears to be considering a piecemeal approach,” she said of the CFTC.
Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley have argued that the Dodd-Frank proposal threatens to hurt the competitiveness of Wall Street banks compared with their non-U.S. rivals. Michel Barnier, the European Union financial markets commissioner, has urged U.S. regulators to better coordinate Dodd-Frank rules with counterparts in other nations that are also writing new regulations following the 2008 credit crisis.
The CFTC may publish guidelines within weeks on the international reach of the rules, Sommers said. The guidelines will cover when institutions would be required to register with the CFTC as swap dealers. The agency may consider other guidelines or rules governing the international reach of new clearing and market-infrastructure rules. The guidelines would be open to public comment, Sommers told reporters after the speech.
The agencies should publish a joint or coordinated rule, Sommers said.
Reducing Market Risk
The CFTC and SEC are leading U.S. efforts to write new derivatives regulations to reduce risk and increase transparency in the swaps market. The regulations seek to have most swaps guaranteed by clearinghouses that stand between buyers and sellers, and traded on exchanges or other venues.
Sommers said the CFTC’s regulations have not adequately considered public comments and have lacked an analysis of their costs and benefits.
“I do not believe that these rules have a chance of withstanding the test of time but instead believe that the commission will be consumed over the next few years using our valuable resources to rewrite the rules we knew or should have known would not work when we issued them,” she said.