Congress should amend the Dodd-Frank Act to remove barriers to global regulators sharing data about the $708 trillion swaps market, the U.S. Securities and Exchange Commission’s head of international affairs said.
The 2010 law requires regulators from other nations to indemnify so-called swap-data repositories and U.S. regulators against litigation costs before accessing the data. The requirement may undermine regulators’ access to data kept in repositories such as the Depository Trust and Clearing Corp. as they seek to enforce new rules designed to reduce risk and increase transparency.
The requirement “interferes with access to essential information” because most foreign governments lack authority to provide indemnification, Ethiopis Tafara, the SEC’s head of international affairs, said in testimony prepared for a House Financial Services subcommittee hearing today. “In removing the indemnification requirement, Congress would assist the SEC, as well as other U.S. regulators, in securing the access it needs to data held in global trade repositories,” he said.
The House subcommittee, controlled by Republicans, is considering legislation that would repeal the indemnification requirement. Dodd-Frank, enacted after largely unregulated swaps helped fuel the 2008 credit crisis, is intended to increase transparency of the derivatives market by requiring price and trade information to be reported to data repositories.
“Previous attempts by the U.S. agencies to ‘fix’ indemnification through regulation did not work,” Craig Donner, a DTCC spokesman, said yesterday in an e-mail statement. “The only viable solution to prevent data fragmentation is a straight legislative fix that removes the provision from the law.”
The Commodity Futures Trading Commission, which is required to write derivatives rules alongside the SEC, is working on guidance on the issue, Dan Berkovitz, the CFTC’s general counsel, said at the hearing. “We believe we have authority to address this issue,” he said.
The CFTC may seek comment on the guidance within the next few weeks, he said. The CFTC hasn’t decided whether the bill before the committee is necessary to resolve the concerns, Berkovitz said.