House lawmakers passed legislation June 12 that would curb theauthority of the U.S. Commodity Futures Trading Commission (CFTC)to oversee the $633 trillion global swaps market.

The bipartisan bill's approval came as a majority of CFTCcommissioners have signaled they want to delay final action on hownew derivatives rules apply to foreign banks and the overseasaffiliates of U.S. banks and hedge funds.

Chairman Gary Gensler insists the agency should take its finalvote on the guidance by July 12, when the current deadline expires.While the bill is not expected to be introduced in the Senate, theHouse vote could increase pressure on Gensler to agree to adelay.

The legislation “will restore much-needed sanity to the rulewriting of the extraterritorial application of U.S. swapsregulation,” said Representative Scott Garrett, a New JerseyRepublican who sponsored the bill.

The CFTC will decide how to press forward after the Securitiesand Exchange Commission (SEC) last month outlined a differentapproach to regulating swaps that it oversees, which hews closer toindustry viewpoints. The House bill would exempt foreign banks fromCFTC rules if their home countries have broadly similar regulationsand would force the CFTC and SEC to reconcile their approaches.

The House passed the bill 301 to 124, with 73 Democrats votingfor it. The legislation isn't expected to be considered by theSenate, Representative Jim Himes, a Connecticut Democrat on theHouse Financial Services Committee, said April 25. Himes voted forthe bill, as did Representative Collin Peterson of Minnesota, thetop Democrat on the committee that oversees the agency.

The legislation “is intended to send a message that Congresswould like them to delay in order to achieve greater harmonizationin the approach to cross-border regulation with the SEC,” saidAnnette L. Nazareth, a former SEC commissioner and Washington-basedpartner at Davis Polk & Wardwell.

President Barack Obama's administration said in a June 11statement that it opposes the bill, adding that its passage “wouldbe premature and disruptive to the current and ongoingimplementation of the reforms” required by Dodd-Frank.

The international reach of CFTC swap-trading requirements hasbeen one of the most controversial elements of the Dodd-Frank Act.The CFTC became the predominant U.S. regulator of swaps under the2010 law, while the SEC was assigned to write rules for equity andsome credit-default swaps.

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.