CFTC holds 7th meeting to issue swaps rules

WASHINGTON (BestGrowthStock) – The following are highlights from a U.S. Commodity Futures Trading Commission hearing on Thursday that introduced rules for swap execution facilities, and outlined who would be eligible for a key exemption from mandatory clearing requirements.

It was the seventh meeting the CFTC has held as part of a broader push by the agency to implement rules to overhaul the $600 trillion over-the-counter swaps market under the Dodd-Frank financial law enacted in July.

Speakers at the hearing include Chairman Gary Gensler and commissioners Michael Dunn, Jill Sommers, Bart Chilton and Scott O’Malia.

GENSLER ON POSSIBLE EXEMPTION FOR SMALL FINANCIAL ENTITIES:

“I know that some of my fellow commissioners had hoped we would be very explicit and have a proposal on that today. If anybody’s at fault its probably me. I suggested some time ago a little bit more process to ask the public for some help on this very important thing.

It would be my full anticipation that some time over the next seven months, that we would be learning from public and taking that up as well.”

SOMMERS ON SEF DEFINITION:

“Even though we’re not considering the SEF proposal, my concern this week is that we’re defining SEFs too narrowly. I hope in the seven days we have to consider this rule … that we will address some of the concerns about looking at that definition too narrowly.”

GENSLER ON SEF DEFINITION DELAY:

“We have seven days, and it might actually change by next week.”

CHILTON ON POSITION LIMITS PROPOSAL:

“For a couple of years I’ve been supporting position limits. We had authority to impose those prior to Dodd-Frank, but weren’t able to get support to do it. Now we have the law.

We’ve seen more positions coming into markets than ever before. There’s certainly disagreement about the impact of speculators on prices, but any impact isn’t acceptable.

We’ve seen gas prices raise 10 cents. Crude is around $90, raised $7 in two weeks. I’m not saying its speculators, but it’s our job to do what we can and now we have the law on our side.”

CHILTON ON DIVIDING UP POSITION LIMITS PROPOSAL:

“I really appreciate the chairman’s commitment to taking this up next week and looking at this in slightly different way, perhaps on things we can do expeditiously with regard to spot months swaps. Then as soon as possible on the other months and the aggregate months.

It’s an important proposal, I want to get it right.”

GENSLER ON DELAY OF SEF DISCUSSION:

“We had calendared for today discussions of swap execution facilities. I’ve also always said to the press: we’re human. So as chair I decided this morning we’re going to take that one up next week.

I think we’ve had some good further discussions among the commission and staff on that one. This is probably not going to be the last time that we re-calendar something and need an extra week to our work done.”

GENSLER ON POSITION LIMITS PROPOSAL ON DEC 16:

“What I’ve asked staff to do is to pull together two components … one on spot month and one what we call all months combined.

We’ve had a long tradition at this agency setting position limits. We have spot month limits on pretty much all physical commodities and some financial commodities. We think we can move more expeditiously with regard to spot month period and it would be my hope we could vote on something and then finalize something on spot month within the next few months.

With regard to the all months combined as that is so data intensive, that too can hopefully be completed expeditiously. But there is the challenge of doing it and the data that is so necessary for it.”

O’MALIA ON END USER EXEMPTIONS FOR BANKS:

“I am flummoxed as to why we are failing to fully address the issue of excluding small banks, farm credit institutions and credit unions from the definition of financial entity.

“All we are going to do today, after almost five months with this language, is punt it. While I can appreciate the staff’s decision to pose a series of questions aimed at further informing their consideration of the appropriate criteria for such an exception, we are too far into these rulemakings to begin from square one.”

O’MALIA ON SWAP EXECUTION FACILITIES:

“The commission had a lot of options and opinions before it with regard to interpreting the statutory language and the goal of providing greater pre-trade price transparency. Without much reason, the commission chose a limited two-tier approach that relies upon a narrow reading of the statute and a broad reading of an aspiration that, if adopted, will actually diminish the overarching goal of promoting the trading of swaps on SEFs.”

CFTC holds 7th meeting to issue swaps rules