Gary Gensler
Chariman
U.S. Commodity Futures Trading Commission
Chairman of the U.S. Commodity Futures Trading Commission, Mr. Gary Gensler, is prepared to move ahead “with a full and busy agenda” to implement the derivatives reform legislation called for in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Promoting the legislation as including “essential provisions to protect the American public,” Mr. Gensler touched on some of the specific legislation which is the first regulation of over-the-counter derivatives markets. Both bank and non-bank dealers will be subject to capital and margin requirements, business conduct standards and reporting requirements. Referring to new swap execution facilities and centralized clearing houses, Mr. Gensler stressed the importance of transparency in helping to effectively manage risk while also contributing to market liquidity and increased competitiveness.
Mr. Gensler said the CFTC has organized its staff around 30 key topics which they believe will require rule-makings. The staff has already held team meetings to prepare for the tasks that lie ahead. They will be required to complete most rules within 360 days of the bill being signed into law, with some rulings required within as early as 90 days (notably, regulators have six months to define key terms such as major swap participant, while position limit rules are due within 180 days for exempt commodities and 270 days for agricultural commodities).
Two principles will guide the CFTC throughout the rulemaking process, the first of which is the spirit of the statute itself. Second, they expect to “consult heavily” with other regulators and the public. Mr. Gensler has already begun reaching out to his international counterparts in an effort to promote global harmonization of derivatives regulation. The CFTC will begin to hold hearings for public comment on the rule-makings process beginning in September.
In regards to ongoing business, Mr. Gensler said the CFTC will need to re-propose some rules. For example, the rule-making issued in January on position limits in the regulated futures marketplace will need to be amended so that aggregate position limits are set across all markets designated by the legislation.
The CFTC estimates they will need an incremental $25 million on their $261 million budget to adequately address the new responsibilities imposed by the legislation.
"We have to bring derivative markets under the same sunshine as other securities markets," Mr. Gensler said. "We have to lower risk and heighten transparency."
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