Friday, October 12, 2012

Senator Shelby Questions CFTC on Implementation of Dodd-Frank Derivatives Provisions

Senate Banking Committee Ranking Member Richard Shelby (R-AL), and Senator Mike Crapo (R-ID), Ranking Member on the Securities Subcommittee,  have asked the CFTC to respond to a series of questions on the Commission’s recent rulemaking implementing the derivatives provisions of the Dodd-Frank Act. In a letter to CFTC Chair Gary Gensler, the Senators noted that, because the CFTC did not release the key definitions for the rules until recently and has failed to provide sufficient regulatory guidance, there is a great deal of uncertainty about how market participants should comply with these rules. In the view of the Senators, this regulatory uncertainty risks disrupting US derivatives markets and foreign exchange markets and could adversely impact the economy. the Senators asked the CFTC for the agency’s plan for improving the implementation of these rules.

The Senators also asked the CFTC to promptly reply to a series of questions, including why the agency did not extend the October 12 deadline for the rules and how the Commission intends to resolve in a fair and equitable manner requests for relief for non-compliance with the rules. They also ask if Treasury has made a final determination under Dodd-Frank on whether to exempt foreign exchange products from the swap definition and, as a corollary to that, what steps the CFTC has taken to minimize market disruptions until Treasury makes such a determination.

The Banking Committee members noted that a CFTC rule on the timing of acceptance for clearing recognizes differences in technological capabilities among market participants and applies a standard of as soon as technologically practicable. The CFTC staff has, however, indicated that it would interpret the rule as requiring a 60-second standard. The Senators asked the CFTC to clarify whether the as soon as technologically practicable standard or the 60-second standard is the governing standard.