J. Christopher Giancarlo, a leading candidate to head the U.S.Commodity Futures Trading Commission under President-electDonald Trump, called for an overhaul of swaps-trading regulationsthat he blamed for fracturing global markets.

Giancarlo, currently a Republican member of the CFTC, said in aspeech in London Friday that Dodd-Frank Act rules have “causednumerous harms” to the $544 trillion worldwide market by drivingtrading away from banks and other firms that fall under U.S.oversight. He said overseas traders have shunned deals withfinancial firms that bear the “scarlet letters” of U.S. rules,contributing to less efficient and more volatile prices in themarket.

“The time has come for the CFTC to revisit its flawed swapstrading rules to better align them to market dynamics, allow U.S.swap intermediaries to fairly compete in world markets and reversethe tide of global market fragmentation,” Giancarlo, a formerswap-brokerage executive, said at an International Swaps andDerivatives Association conference.

Giancarlo cast the speech as presenting a “forward-lookingagenda” for a “new regulatory environment.” A top candidate to leadthe CFTC in the Trump administration, Giancarlo may also serve asits acting chairman until a permanent replacement is confirmed,people familiar with the matter said last month.

His comments show how regulators may seek to revise or reverseDodd-Frank regulations put in place after the 2008 financialcrisis. The derivatives-trading rules were one of the mostcontentious and heavily lobbied elements of the law's comprehensivenew oversight of the market.

In the speech, Giancarlo also said post-crisis capital rules maybe contributing to increased market volatility and “flash crashes”by discouraging banks from buying, selling and holding biginventories of securities that traditionally provided a “shockabsorber” during turbulent markets.

“I find it disconcerting that, rather than acknowledging andcarefully studying the causes of changing market liquidity, U.S.and foreign regulators continue plowing ahead with capitalconstraining regulations,” he said.

Bloomberg News

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