Financial Regulatory Forum

Energy companies moving forward with CFTC compliance despite uncertainties

By Thomas A. Utzinger (U.S.)

NEW YORK, May 31 (Business Law Currents) – Electric utilities and natural gas companies are facing new regulatory uncertainties involving the jurisdictional reaches of two agencies overseeing futures and derivatives trading as well as wholesale energy transactions: the U.S. Commodity Futures Trading Commission (CFTC) and the Federal Energy Regulatory Commission (FERC). Recent rulemaking efforts and litigation have raised questions as to the overlap and division of powers of these two entities over certain financial transactions and enforcement actions of interest to the energy industry. (more…)

Swapping the rules: derivatives concern SEC, CFTC and the market (Westlaw Business)

Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, gestures as he testifies before the Financial Crisis Inquiry Commission hearing on the Role of Derivatives in the Financial Crisis on Capitol Hill in Washington July 1, 2010. REUTERS/Yuri Gripas (UNITED STATES - Tags: POLITICS BUSINESS)

Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission.

(Westlaw Business) - Swap markets and players were a main focus of Dodd-Frank, yet the SEC and CFTC were left to work out the details. The market, from Ropes & Gray to the Reinsurance Association of America, has provided these regulators with public comment and disclosure commentary. Now that the public comment period has drawn to a close, one thing is clear: issues from “security-based swap” to “swap participant” are certain to have big impact on a broad array of companies, both in financial services and beyond.

Enacted on July 21, 2010, Dodd-Frank incorporated a 360-day-window for the Act’s wrinkles to be smoothed out before implementation. One of the first casualties has been the CFTC’s rejection of discretionary Grandfather relief the Act allows the Commission to provide. Some 300 days remain in which all Dodd-Frank’s administrative detail work must be concluded. According to CFTC Chairman Gary Gensler, 30 teams have been dedicated to address the key policy and drafting issues of the new law. The working definitions of affecting the entire derivatives industry now rest in the hands of the SEC and CFTC.

Title VII of the Act, subtitled Wall Street Transparency and Accountability, defines terms as part of a complex scheme to regulate swap markets and security-based swap markets. The law looks to curtail the kinds of highly leveraged derivatives trades that have the potential to wreck the U.S. economy (again). Even more acutely, the act seeks to prevent Federally regulated institutions from (more) taxpayer bailouts. Market experts, however, have expressed concern that without narrow tailoring, these changes could not only increase compliance costs and margin requirements, but erect barriers to entry and foreclose the use of important risk management tools.

ANALYSIS-Even with new rules, life goes on for Wall Street

By Steve Eder

NEW YORK, June 25 (Reuters) – U.S. lawmakers have hammered out a law that is designed to fundamentally change Wall Street, but financial professionals largely yawned.

Legislators took steps that at first blush could change the industry, including limiting banks’ swaps-dealing operations and their investments in private equity and hedge funds.

But in the end, banks like Goldman Sachs Group Inc, JPMorgan Chase & Co and Morgan Stanley won concessions that watered down the proposals that could have been most damaging to their profits, staving off a watershed overhaul like the one that took place after the Great Depression.

FACTBOX-US swaps reforms proposed by Agriculture panel

WASHINGTON, April 23 (Reuters) – The Senate Agriculture Committee has proposed tough rules for the previously unregulated $450 trillion derivatives market, including a requirement for banks to spin off their swaps trading desks.

Banks and major financial companies that dominate the market are concerned the proposal could cut into their profits — and businesses ranging from oil companies to manufacturers that use derivatives to hedge risk are also worried the bill could hike their costs.

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Fannie, Freddie to clear interest rate swaps

   By Ann Saphir
   BOCA RATON, Fla., March 11 (Reuters) -   Fannie Mae and Freddie Mac, the mortgage-funding giants that were seized by the government in September 2008, will start using central counterparty clearing this year in a move that could mark a seismic shift in the $400 trillion global swaps market. (more…)

US’s Frank wants SEC/CFTC to decide on swaps clearing

By Kim Dixon and Karen Brettell
WASHINGTON/NEW YORK, Nov 3 (Reuters) – U.S. regulators should be given authority to determine whether a privately traded derivative contract should be cleared through a central clearinghouse, the chairman of the House Financial Services Committee said on Tuesday.

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US House panel approves new derivatives rules

WASHINGTON, Oct 15 (Reuters) – New rules for the largely unpoliced, $450-trillion over-the-counter derivatives market were approved by a key U.S. congressional committee on Thursday in a win for the Obama administration.

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U.S. firms that hedge risk win reprieve on derivatives rules

By Charles Abbott and Rachelle Younglai
WASHINGTON, Oct 7 (Reuters) – Congress’ chief architect on financial regulation said on Wednesday companies that use derivatives to hedge their risk would not be forced to comply with all the new rules for the $450 trillion private swaps market.
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