US Regulator To Outline Changes To Derivatives Rules This Year

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A top federal regulator will further delay a flood of new rules for the $600 trillion derivatives market, another setback for the sweeping overhaul passed in the aftermath of the financial crisis.

Gary Gensler, chairman of the Commodity Futures Trading Commission, announced on Thursday plans to wrap up the agency’s rule-writing in the first few months of 2012. The agency said in June that it would miss deadlines to finalize dozens of new derivatives rules, though the holdup was only supposed to last until the end of this year, a roughly six-month delay.

“We are focused on considering these rules thoughtfully – not against a clock,” Mr. Gensler said at a public meeting in Washington on Thursday.

The agency has finalized 12 new rules so far, a small dent in its duty under the Dodd-Frank Act, which cracked down on the murky derivatives industry. Some 40 rules remain on hold, including the most contentious proposals that will spell out which companies would be exempt from the rules.

Mr. Gensler, for the first time, outlined a formal timeline for many rules stemming from the Dodd-Frank Act. He cautioned, however, that the timing was tentative.

“No doubt, as this is a human endeavor, there will likely be changes to this outline down the road,” Mr. Gensler said.

The agency’s Republican commissioners, who have long called for Mr. Gensler to both slow down and disclose a rule-making timetable, praised the announcement.

“This is a helpful first step,” said Jill Sommers, a Republican member of the commission.

Next up on the agenda are final rules for derivatives clearinghouses and limits on speculative commodity trading. Bart Chilton, a Democratic commissioner and a leading proponent of so-called position limits, responded with an elated “boo-yah.”

The agency is drafting a formal order that would exempt the derivatives industry from complying with Dodd-Frank until the rules are finalized, Mr. Gensler said.

The agency on Thursday also proposed a plan to phase in compliance. Under the proposal, advanced in a 4-to-1 vote, Wall Street banks will have a three-month grace period before they must run derivatives deals through clearinghouses, which act as a backstop in case one party defaults. Hedge funds, pensions and other private funds will have six months to comply once the agency finalizes the clearing requirement.

“Recognizing that some market participants may require more time than others to comply, these proposed rules are part of our effort to help ensure they can adequately plan,” Mr. Gensler said.

Still, Mr. Gensler warned that some delays could keep the financial system at risk.

“Until the C.F.T.C. completes its rule-writing process and implements and enforces these new rules, the public remains unprotected,” he said.

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Source : https://dealbook.nytimes.com/2011/09/08/regulator-further-delays-derivatives-rules/

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