Twenty-first century finance knows no true geographic borders. Money and risk can move around the globe with a touch of a button. Sober evidence of this was AIG’s swaps affiliate, AIG Financial Products, which had its major operations in London. When it failed, the U.S. economy and taxpayers shouldered a tremendous burden.
The current debt crisis in Europe is but a stark reminder of our interconnectedness. Moreover, it is precisely during times of heightened market uncertainty that transparent pricing of risk is essential. While European leaders are working to avert a deepening crisis, it is critical that we implement the Dodd-Frank Act to protect the American public.
We are actively consulting and coordinating with international regulators to promote robust and consistent standards in swaps oversight. We are sharing many of our memos, term sheets and draft work product with international regulators. Building on these efforts, I will be traveling to London tomorrow to discuss derivatives reform as well as issues relating to high-frequency trading.
We also will work with international colleagues on memoranda of understanding for access to information and cooperative oversight. We also have a long history of recognizing foreign regulatory regimes. The Dodd-Frank Act authorizes the CFTC to recognize foreign regulatory frameworks that are comprehensive and comparable to U.S. oversight of the swaps markets in certain areas. We also anticipate seeking public input on the application of Section 722(d) of the Dodd-Frank Act, which says that the law doesn’t apply to activities outside the United States unless those activities have a direct and significant connection with activities in, or effect on, U.S. commerce.
In addition to finishing the rules, we need additional resources consistent with the CFTC’s significantly expanded mission and scope. The swaps market is seven times the size of the futures market that we currently oversee, and it is far more complex.
Moreover, we need additional resources to respond to regulatory inquiries from market participants after the rules are completed. No doubt, many of you will come to see us with questions or to register with the agency. Every swap execution facility and swap data repository will have to register with the CFTC, and we’ll need the staff to handle those registrations. Furthermore, though, as proposed, swap dealers will register with the National Futures Association, we anticipate that every group of registered entities will have questions directly for us. There is a great benefit to have people at the CFTC who will be able to sort through your questions and get you the responses you deserve.