U.S. regulators will inject risk into the derivatives market ifthey don't take more time to coordinate Dodd-Frank Act rules withtheir overseas counterparts, six Democratic senators said.

The Commodity Futures Trading Commission (CFTC), facing a July12 deadline to determine the overseas reach of its rules, shouldtake additional time to coordinate oversight with other regulators,the senators said in a letter yesterday to Treasury Secretary JacobJ. Lew.

“Creating an overly complicated compliance system for marketparticipants will result in conflicting, duplicative orinconsistent rules that could foster new and unforeseen risks andlead to international regulatory arbitrage,” the senators said.“More time is needed for domestic harmonization and sequencing withregulations that occur abroad.”

The letter was signed by Kirsten Gillibrand of New York, TomCarper of Delaware, Kay Hagan of North Carolina, Heidi Heitkamp ofNorth Dakota, Michael Bennet of Colorado, and Charles Schumer ofNew York.

Steve Adamske, the CFTC spokesman, and Suzanne Elio, TreasuryDepartment spokeswoman, both declined to comment.

The guidance would govern the reach of rules affecting GoldmanSachs Group Inc., JPMorgan Chase & Co., Barclays Plc, and otherbanks, hedge funds, and companies in the $633 trillion global swapsmarket.

The international reach of the CFTC swap trading requirementshas been one of the most controversial elements of the agency'sDodd-Frank Act rules, prompting opposition from financial companiesincluding Goldman Sachs and Barclays.

Democratic Senators Sherrod Brown of Ohio, Carl Levin ofMichigan, Tom Harkin of Iowa, Elizabeth Warren of Massachusetts,Jeff Merkley of Oregon, and Dianne Feinstein of California in Mayurged the CFTC to strengthen the reach of its rules.

“If anything, the CFTC should be going further,” Warren said ina telephone interview today. “If the last piece is a loophole thatlets any company operate through guaranteed affiliates using a postoffice box in some foreign jurisdiction, then it undercutseverything we've done.”

CFTC Chairman Gary Gensler said June 25 that his agency shouldpush through its cross-border derivatives guidance by July 12 andopposed a proposal from a fellow Democrat on the commission, MarkWetjen, for “interim final guidance” that could be amended based onindustry and public feedback.

“It means delay, and I think we've had a year to do this,”Gensler told reporters after testifying before a SenateAppropriations subcommittee in Washington. “The American publicshould hold us to task if we can't get this done by July 12. Theyshould say, 'Why does it take so long, and are we doing too much toaccommodate Wall Street?'”

Jill E. Sommers, a Republican CFTC commissioner, released astatement yesterday defending Wetjen's position and criticizingGensler's contention that efforts to delay rules are meant toundermine Dodd-Frank, the regulatory overhaul enacted in responseto the 2008 credit crisis.

“No one has ever accused Gary Gensler of being reasonable,”Sommers said in her statement. “I may not totally agree with it,but Commissioner Wetjen has put a reasonable proposal on the tablethat would achieve multiple goals. He understands the importance ofworking in good faith with other global regulators.”

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