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SEC Delaying Dodd-Frank Swap Rules, Says CFTC’s Chilton

A council of U.S. financial regulators should speed up Dodd-Frank Act rules delayed by inaction at the Securities and Exchange Commission, said Bart Chilton, a Democrat on the Commodity Futures Trading Commission.

The commissions are required by Dodd-Frank to jointly define which derivatives contracts are swaps and will fall under clearing, trading and reporting requirements. The definition is needed before limits on speculation in oil, natural gas, wheat and other commodities can take effect, Chilton said in a speech prepared for a conference of the Mutual Fund Directors Forum in Washington.

“We have been continually reassured we are going to consider this joint rule with the SEC ‘next month’,” Chilton said. “I see no promise of movement from the SEC on this. We are two years into this new law, and position limits were supposed to be implemented after six months.”

Chilton said the 10-member Financial Stability Oversight Council, led by Treasury Secretary Timothy F. Geithner, should intervene to speed up the process. The council includes the heads of the CFTC, SEC, Federal Reserve and Federal Deposit Insurance Corp. among other members.

SEC Chairman Mary Schapiro told the senate Banking Committee on May 22 that her agency and the CFTC are cooperating. “Although the timing and sequencing of the CFTC’s commission’s proposal and adoption of rules may vary, they are the subject of extensive interagency discussions,” she said.

The speculation limits are among the most controversial requirements in Dodd-Frank and spurred more than 13,000 comments to the CFTC from supporters such as Delta Air Lines Inc. and opponents such as Barclays Capital. CFTC commissioners voted 3-2 at an Oct. 18 meeting to approve the final regulation.

Suits Filed

The International Swaps and Derivatives Association Inc. and Securities Industry and Financial Markets Association filed a lawsuit in December challenging the rule. The associations’ members include JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley. The groups argue that the CFTC never studied whether the regulation was “necessary and appropriate” or quantified the costs tied to implementing the rule. A judgment is pending.

The case is International Swaps and Derivatives Association v. U.S. Commodity Futures Trading Commission, 11-02146, U.S. District Court, District of Columbia (Washington).

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