U.S. needs more time on overseas swaps, Democratic senators say

July 12 deadline looms

U.S. regulators will inject risk into the derivatives market if they don’t take more time to coordinate Dodd-Frank Act rules with their overseas counterparts, six Democratic senators said.

The Commodity Futures Trading Commission, facing a July 12 deadline to determine the overseas reach of its rules, should take additional time to coordinate oversight with other regulators, the senators said in a letter today to Treasury Secretary Jacob J. Lew.

“Creating an overly complicated compliance system for market participants will result in conflicting, duplicative or inconsistent rules that could foster new and unforeseen risks and lead to international regulatory arbitrage,” the senators said. “More time is needed for domestic harmonization and sequencing with regulations that occur abroad.”

The letter was signed by Kirsten Gillibrand of New York, Tom Carper of Delaware, Kay Hagan of North Carolina, Heidi Heitkamp of North Dakota, Michael Bennet of Colorado and Charles Schumer of New York.

The guidance would govern the reach of rules affecting Goldman Sachs Group Inc., JPMorgan Chase & Co., Barclays Plc and other banks, hedge funds and companies in the $633 trillion global swaps market.

The international reach of the CFTC swap trading requirements has been one of the most controversial elements of the agency’s Dodd-Frank Act rules, prompting opposition from financial companies including Goldman Sachs Group Inc. and Barclays Plc.

‘Means Delay’

CFTC Chairman Gary Gensler said yesterday that his agency should push through its cross-border derivatives guidance by July 12 and opposed a proposal from a fellow Democrat on the commission, Mark Wetjen, for “interim final guidance” that could be amended based on industry and public feedback.

“It means delay, and I think we’ve had a year to do this,” Gensler told reporters after testifying before a Senate Appropriations subcommittee in Washington. “The American public should hold us to task if we can’t get this done by July 12. They should say, ‘Why does it take so long and are we doing too much to accommodate Wall Street?’”

Jill E. Sommers, a Republican CFTC commissioner, released a statement today defending Wetjen’s position and criticizing Gensler’s contention that efforts to delay rules are meant to undermine Dodd-Frank, the regulatory overhaul enacted in response to the 2008 credit crisis.

“No one has ever accused Gary Gensler of being reasonable,” Sommers said in her statement. “I may not totally agree with it, but Commissioner Wetjen has put a reasonable proposal on the table that would achieve multiple goals. He understands the importance of working in good faith with other global regulators.”

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