The Commodity Futures Trading Commission has proposed to delay some rules for the swaps market until as late as Dec. 31, 2011.
In a public meeting here Tuesday, the commission voted unanimously to grant temporary relief from requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act that would have required the agency to have certain rules in place by July 16, within 360 days of the statute’s enactment.
In his opening statement, CFTC chairman Gary Gensler distinguished between his agency’s proposal and recent efforts among Republican lawmakers to slow down derivatives rulemaking required by Dodd-Frank.
“There have been suggestions to delay implementation of the derivatives reforms included in the Dodd-Frank act,” Gensler said. “That is not what today’s proposed order is. Instead, it provides the time necessary for the commission to complete the rulemaking process to implement the Dodd-Frank Act.”
The CFTC’s measure would provide a hiatus designed to address gaps in the agency’s rulemaking. Specifically, it would apply to swaps rules that are scheduled to go into effect on July 16 and that refer to as-yet-undefined terms in the commission’s regulatory framework, including “swap,” “swap dealer,” and “major swap participant.”
For such rules, the CFTC’s proposal would provide regulated persons and entities a temporary exemption, lasting until as late as the end of December. The proposal would not apply to Dodd-Frank rules that have already become effective, the commission said in a release.
The commission also said it would post additional information on its website indicating which swaps rules will become effective on July 16, and which will be delayed.
Commissioner Jill Sommers said she reluctantly supported the measure to provide guidance to swaps participants, who worry the unfinished regulatory framework could undermine confidence in their market.
In particular, she said, some swap dealers have told public pension funds they will not serve as the fund’s counterparty after July 16.
“This kind of ambiguity is not acceptable,” Sommers said.
The CFTC is asking for public comments on the proposal, with a 14-day comment period set to expire at the end of June. The commission will weigh the comments and seek to vote on a final proposal before July 16, Gensler said.
In a statement released Tuesday, an industry group embraced the CFTC’s move.
“The Dodd-Frank Act creates an entire new legal framework and entails a complex rulemaking agenda; we encourage and appreciate efforts to get it right and to ensure markets are not disrupted while this important rulemaking proceeds,” said Ken Bentsen, executive vice president of the Securities Industry and Financial Markets Association.
A swap dealer, however, gave the proposal a mixed review.
“During this period, we remain in a gray area, where there is ambiguity about what will happen,” said Peter Shapiro, managing director of Swap Financial Group LLC in South Orange, N.J. “The market does need stability, resolution, and the ability to move on, and regulatory ambiguity is a net negative.”
