CFTC's Gensler says reviewing cross-border application comments, consulting with other regulators
First Published 23rd October 2012
The approach the CFTC will take to cross-border application of Dodd-Frank is still under discussion, according to Chairman Gary Gensler. Expect "fine-tuning" to rule making, he says.
New York - Commodity and Futures Trading Commission Chairman Gary Gensler said the US regulator was still considering comments and consulting with other regulators on the cross-border application of the Dodd-Frank act.
The issue is an important one for markets, with many participants concerned that the US could require entities in markets abroad to abide by Dodd-Frank rules rather than a principle-based application of what is known as substitute compliance. That is where an entity outside of the United States could be governed by local regulation when doing business with US-based firms so long as the local regulation in principle was designed to achieve the same outcomes as Dodd-Frank.
"The CFTC has been reviewing many thoughtful comments and consulting with the regulatory community here and abroad as we move to finalise them shortly," Gensler said at the annual meeting of the Securities Industry and Financial Markets Association. "In the interim, the CFTC issued time-limited relief to certain foreign legal entities regarding the counting of swaps toward the de minimis swap-dealing threshold."
Gensler said fine-tuning was to be expected.
"Given the new era of swaps market reform, it's the natural order of things that market participants have sought further guidance. This regularly occurs as we move to market implementation from congressional legislation and agency rulemaking," he said. "Fine-tuning is expected."
The CFTC also will continue to consult broadly on appropriately phasing in compliance, the chairman added.
Gensler also called for a public discussion on the transition from the old LIBOR system, which led to one of the biggest scandals in recent years when a number of banks were found to be rigging the system.
"As a next step, the market and market participants will need to focus on how to smoothly transition from benchmark rates that may have become obsolete. There have been circumstances in the past, albeit in smaller markets, such as the gasoline market, when a benchmark has become obsolete and a transition was put in place," Gensler said.
He noted that the Bank for International Settlements (BIS) and the International Organization of Securities Commissions (IOSCO) would be making recommendations.
"The IOSCO task force plans to seek public consultation hopefully starting in December. This will include a public roundtable and culminate in a report and recommendations in the spring. The IOSCO task force will be seeking public input on possible mechanisms and protocols that would best ensure for a smooth transition when needed."