June 19, 2012 1:47 am

Strained SEC holds up swaps rules

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New rules intended to regulate the $648tn swaps market are being delayed by the US Securities and Exchange Commission over the objections of other regulators and lawmakers, people familiar with the matter said.

Regulators at the Commodity Futures Trading Commission had been poised to define swaps and related financial instruments on Thursday, providing the foundation for a number of new rules that have been finalised but have not yet gone into effect due to a lack of basic definitions.

But SEC commissioners need more time to review the final definitions before voting on them. The four commissioners, excluding Mary Schapiro, chairman, rely on a handful of staff to study proposed rules.

The commissioners received the definitions proposal earlier this month. They typically get about 30 days to review rules before voting on them.

The 2010 overhaul of US financial rules, known as Dodd-Frank, and a recent law intended to ease businesses’ access to capital have strained the SEC’s resources, and the agency has struggled to keep pace with rule-writing requirements. The commissioners’ staffs especially have not grown to keep up with the new responsibilities.

The proposed final swap definitions comprise more than 500 pages of text.

The delay in approving them has led to delays with several otherwise finalised rules, such as regulations that limit the number of positions in some commodities and their related swaps and so-called “real-time reporting” that aims to help investors get better prices from dealers.

This has incensed key lawmakers and put increased pressure on the CFTC, the agency with the most responsibility for supervising derivatives markets.

More than a dozen Senate Democrats, led by Dianne Feinstein of California, wrote regulators a letter on Monday to express their anger, saying of the swaps definitions that “any further delay of such a basic requirement is entirely unacceptable”.

Last month, Richard Shelby, the top Republican on the Senate banking committee, said, “Almost two years after the passage of Dodd-Frank, giving the CFTC and the SEC joint jurisdiction over the swap market, they have still not agreed on the definition of a swap.”

The definitions were first proposed more than a year ago. On Tuesday, Gary Gensler, CFTC chairman, will tell House lawmakers that his agency and the SEC “should consider it expeditiously”.

Mr Gensler’s agency is ready to vote on the definitions, people familiar with the matter said.

The SEC said: “This is a joint agency effort and we’re on the same timeframe for completion.” The CFTC declined to comment.

The CFTC has been among the most aggressive agencies at implementing Dodd-Frank rules. The agency has finalised about two-thirds of the 60 regulations it is supposed to implement, according to Davis Polk & Wardwell, a law firm.

The SEC has been among the laggards, missing deadlines on roughly three-fifths of the 95 rules it is supposed to finalise.

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