Turning Back Clock on Swaps Rules

Re-proposing derivatives regs would give market more time to review them.

Trade groups representing the biggest U.S. financial companies said regulators should re-propose derivatives rules required by the Dodd-Frank Act to give banks, swap dealers and asset managers more time to review them.

Re-proposing rules would delay them by “months, not years, and the costs of any such delay will be far outweighed by the benefits,” groups including the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association wrote to the Securities and Exchange Commission and the Commodity Futures Trading Commission.

“Allowing for more than one round of comments helps ensure that market participants can more fully assess the implications of a set of rules in their entirety,” the seven groups said in their letters.

Dodd-Frank, the rules overhaul enacted in July, requires the SEC and CFTC to write regulations to improve transparency and curb risk in the $601 trillion over-the-counter swaps market after unregulated trades exacerbated the 2008 credit crisis. The CFTC, which is responsible for all but security-based swaps, has proposed most of its planned rules and aims to complete them this year, CFTC Chairman Gary Gensler has said.

JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc. executed 96 percent of the $298 trillion in over-the-counter derivatives trades by the top 25 U.S. bank-holding companies as of Dec. 31, according to the Office of the Comptroller of the Currency.

In re-proposing the rules, regulators should offer a timetable for implementing them and guidance on how Dodd-Frank applies to trades conducted outside the U.S., the groups said in the May 26 letter to the CFTC and the May 31 letter to the SEC.

In addition to Sifma and ISDA, the letters were signed by the U.S. Chamber of Commerce, the Futures Industry Association, the Financial Services Roundtable, Institute of International Bankers and the Insured Retirement Institute.

Scott Schneider, a CFTC spokesman, and John Nester, an SEC spokesman, declined to comment on the industry groups’ letter.

 Bloomberg News

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