In a group letter to Congressional leaders, derivative end-users and other interested parties seek a deadline extension.
Back in March, Commodity Futures Trading Commission Chairman Gary Gensler said in a speech that his agency would miss the July deadline for writing some of the Dodd-Frank rules. But now a group business and industry associations wants it made official.
In a letter to chairmen and ranking members of a host of House and Senate committees, corporate members of a wide range of industry associations including the US Chamber of Commerce, the Agricultural Retailers Association, the Commodity Markets Council, Edison Electric Institute, the National Association of Wheat Growers and more than a dozen others – pushed lawmakers to extend the July 15, deadline.
“We strongly urge Congress to extend the deadline for final rule publication to allow regulators sufficient time to develop a transparent and orderly system that minimizes unintended consequences,” participants wrote in the letter.
The letter went on to describe the enormous task before Dodd-Frank rule-writers, the scope and “extraordinary pace” of the process. They cited Harvard Law Professor Hal Scott who calculated that the Securities and Exchange Commission (SEC) averaged fewer than 10 new rules per year before the crisis, “but has issued 59 rules since Dodd-Frank was enacted in July 2010.” Likewise, the CFTC “issued fewer than six new rules per year before the crisis, but has issued 37 rules since enactment of Dodd-Frank.” They argued that almost none of the proposed rules had been finalized so far and that only “11 of the 105 rules the CFTC and SEC must promulgate by July 15 are complete.”
A question of margin
One of group’s biggest complaints is the current machinations regarding margin requirements. “While we had believed, based on the clear language of Title VII and the unequivocal statements of the bill managers, that margin rules would not apply to end-users, we understand that some regulators are nevertheless intending to impose such requirements,” they wrote. “These regulations were originally expected to be proposed in December 2010. Now, we are told to expect them in April. For a rule such as this, which could cost the economy billions of dollars in liquidity and more than 100,000 jobs, to be promulgated under the exigency of a looming deadline is both shortsighted and potentially damaging. But the problem can be avoided.”
CFTC’s Gensler has indicated on many occasions that his agency will have the final say on margining, most recently attempting to assuage critics by saying the CFTC “will get it right.” (See related story here.) But another problem exists and that involves the Federal Reserve. According to risk consultant Chatham Financial, the Fed and other prudential, regulators may override the CFTC and make all end-users post-margin (see related story here).
However it all works out, the current letter seeks a more thorough, thoughtful and examined process. “Regulators need more time to develop a carefully calibrated regulatory system that will protect the economy and promote job growth and investment,” wrote the signatories.
What they don’t want is a jumbled set of rules that are at cross purposes or rife with unintended consequences.