Good morning. This meeting will come to order. This is a public meeting of the Commodity Futures Trading Commission (CFTC) to consider final rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). I’d like to welcome members of the public, market participants and members of the media, as well as those listening to the meeting on the phone or watching the webcast.
I would like to thank Commissioners Sommers, Chilton, O’Malia and Wetjen for their significant contributions to the rule-writing process.
Today, I particularly want to thank the CFTC’s hardworking and dedicated staff. Under Dodd-Frank, this agency has been tasked to oversee the swaps market, which is seven times the size of the futures market. The staff is working incredibly long and hard hours to write new rules of the road to make this market safer for the American public. I know I express the sentiments of my fellow commissioners when I say that we hope all of you enjoy the holidays with your families.
As the year draws to a close, I would like to reflect on what the Commission has accomplished this year. This time last year, this agency was writing rule proposals for the recently passed Dodd-Frank Act. Now, the CFTC has substantially completed the proposal phase, and last summer, we turned the corner and started finalizing rules. So far, we have finished 20 rules – potentially 22 after today.
The CFTC is working to complete these rules thoughtfully – not against a clock. We have benefited from significant public input, including 27,000 comment letters, 1,100 meetings and 14 roundtables with more roundtables scheduled for next year.
Some of the major rules we finalized are:
• The large trader reporting rule that provides a detailed and up-to-date view of the physical commodity swaps market so regulators can police for fraud, manipulation and other abuses. This rule went into effect November 21. As soon as this rule was finalized, CFTC staff immediately engaged with market participants to ease the process of compliance. In addition to regular dialogue, our staff developed a guidebook of data standards, which can be found on our website. In similar fashion, our staff will reach out to market participants regarding today’s data rule.
• The rule establishing registration and regulatory requirements for swap data repositories (SDRs), which will gather data on all swaps transactions. The rule became effective October 31, and the registration process is underway.
• Rules giving the Commission more authority to effectively prosecute wrongdoers who recklessly manipulate the markets and rewarding whistleblowers for their help in catching misconduct in the financial markets. The anti-manipulation rule went into effect August 15, and the whistleblower rule became effective October 25. The whistleblower office is up and running with a director in place.
• Rules establishing risk management and other regulatory requirements for derivatives clearing organizations. Centralized clearing lowers risk by reducing the interconnectedness between financial entities.
• Position limits rules that limit aggregate speculative positions in the futures and swaps markets.
• And a rule we completed this month enhancing customer protection regarding investment of their funds. This rule brings customers back to protections they had prior to exemptions the Commission granted between 2000 and 2005.
Today marks our 22nd open meeting on Dodd-Frank rules. We will consider two significant final rules, both of which will increase swaps market transparency:
• Data Recordkeeping and Reporting, and
• Real-Time Reporting
In addition, yesterday the Commission approved exemptive relief regarding the effective dates of certain Dodd-Frank Act provisions. It had originally been calendared for today.
One of the most important goals of Dodd-Frank reform is shining the light of transparency on the opaque swaps markets. The more transparent a marketplace is, the more liquid it is and the more competitive it is. When markets are open and transparent, prices are more competitive, markets are more efficient, and costs are lowered for companies and their customers. Economists have agreed for decades that transparency actually reduces costs.
Today we are considering a rule on the specific swaps data that will be reported to SDRs. This rule will ensure complete, timely and accurate data on all swaps is available to the Commission and other regulators. This data will provide a comprehensive view of the entire swaps market, strengthening our ability to police the markets and protect against systemic risk. It requires data reporting when the transaction is executed and over the lifetime of the swap.
By contrast, leading up to the financial crisis, there was no required reporting about swaps trading, and this lack of market transparency made the risk that had spread throughout the financial system all the more difficult to identify.
Based on comments we received, the rule phases in the start of compliance by both asset class and counterparty type.
Also today, we are considering the real-time, public reporting rule for swaps, which will bring post-trade transparency to the swaps market. This rule will give the public critical information on the pricing of transactions – similar to what has been working for decades in the securities and futures markets.
The rule phases in compliance dates based on market participants, place of execution and underlying asset – which was the result of feedback from commenters and consultations with other regulators. As we will be reproposing the block rule, until that rule is finalized, every transaction will be reported post transaction with a time delay, as if it were a block.
Moving forward, we have a full schedule of Commission meetings into 2012, beginning with January 11 and 17. Our goal is to finish the remaining Dodd-Frank rules next year.
I want to conclude by pointing out that until we complete the Dodd-Frank swaps market reforms, the American public remains at risk. The financial crisis of 2008 had real costs – both to the American economy and to the American public. We cannot forget that when financial institutions fail, real people’s lives are affected. More than eight million jobs were lost, and millions of Americans continue struggling to make ends meet.
In 2012, the CFTC staff will continue working days, nights and weekends to ensure that the American people are safer than they were in 2008.
Before we hear from the staff on the rulemakings that we will consider today, I will recognize my fellow Commissioners for their opening statements.