CFTC chair's last stand on swaps has Wall Street calling lawyers

Attorneys are targeting last-minute rule changes

Futures Market

The advisories that Gensler has issued since late September extend beyond foreign trading rules. One warned swap-trading platforms not to limit trades to dealer banks. Any such effort to keep out traditional buyers of derivatives, such as hedge and pension funds, or have them play by different rules, would be against the law, the CFTC said Nov. 14.

Gensler is also trying to push through rules before the end of the year that would require greater transparency in the futures market. The proposal being prepared at the agency is a response to actions taken last year by CME Group Inc. and Intercontinental Exchange Inc., the two largest futures exchanges, to switch energy swaps to the futures market.

(Bloomberg LP, parent of Bloomberg News, operates a trading platform known as a Swap Execution Facility. The company asked a federal court to force the CFTC to limit the shift of swaps to futures. A judge dismissed the lawsuit, saying that Bloomberg had neither the standing nor the facts to support its case.)

Volcker Rule

On the Volcker rule, Gensler has been demanding changes that would restrict the ability of banks to make portfolio-wide hedges.

Two weeks ago, he sent banking regulators a series of edits he wanted to incorporate in the rule, describing some of them as changes in tone, people briefed on the negotiations said.

While White House officials and Treasury Secretary Jack Lew have said they want the Volcker rule finished by the end of the year, Gensler told Obama on Nov. 12 when he visited the White House for a press conference on Massad’s nomination that there was only a 50-50 chance that regulators would be able to meet that deadline, three people briefed on the meeting said.

Gensler declined to comment, preferring to keep his counsel to the president private, CFTC spokesman Steve Adamske said.

The chairman’s last-minute demands have also strained relations internally at the CFTC, people familiar with the discussions said. Gensler distributed the current draft of the Volcker rule to the other commissioners after their counterparts at the SEC and other regulators had already received it.

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