CFTC Commissioner Gary Gensler acknowledges differences on swap execution between the CFTC and SEC exist but working to close gap.
While working with the Securities & Exchange Commission to harmonize Dodd-Frank Act rules, the Commodity Futures Exchange Commission is “mindful of some traditional differences between the futures and securities markets,” said CFTC head Gary Gensler Monday in remarks to the Wholesale Markets Brokers’ Association.
Mr. Gensler added that the CFTC is making sure that “any differences between the SEF rules and existing regulations for designated contract markets (DCMs), which are boards of trade (or exchanges) that operate under the regulatory oversight of the CFTC, “do not undermine the transparent futures market,” Mr. Gensler said. “The SEC has similar considerations with regard to market structure for security-based swaps in relation to securities trading.”
But while the CFTC is making progress toward finalizing rules on SEFs, there are other rules the agency will address before it considers finalizing them, Mr. Gensler said. Thus an SEF rule will not be implemented until after the new year. “These include joint rules with the SEC on product and entity definitions. We also are working to finalize critical rules related to clearinghouses this fall and rules on straight-through trade processing and client clearing after the first of the year. We are hopeful that we’ll be able to consider the SEF rules in the first quarter of 2012.”
SEFs are relevant to treasury because there is growing support among banks for clearing of derivatives that corporates have been fighting against under the banner of the end-user exemption. Under this argument, of course, corporations would be exempt from central clearing their derivatives, and would allow treasurers to continue to trade bilaterally with their dealers. Still, banks expect to see a fair bit of corporate activity nonetheless (see related story here), despite corporations’ arguments arguing that clearing would increase costs and kill job creation among other things.
Mr. Gensler said in his remarks that adding more transparency to the market – primarily through clearing – will actually save companies money. “[E]conomists have agreed for decades that transparency in markets actually reduces costs,” he said. “Furthermore, we’re hearing from a growing number of market participants … who have said they would like to lower regulatory uncertainty and get going on reform.”