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Tuesday, May 22, 2012

SEC & CFTC Implementing Derivatives Reform

The Senate Banking Committee will hold an open hearing today at 10:00 a.m. entitled “Implementing Derivatives Reform: Reducing Systemic Risk and Improving Market Oversight.” SEC Chairman Mary Schapiro and CFTC Chairman Gary Gensler will give testimony.

Title VII of the Dodd-Frank Act creates an new regulatory regime for over-the-counter (OTC) derivatives, authorizing the SEC and CFTC to write a number of new regulations.

In her prepared testimony SEC Schapiro stated, in the near term the SEC expects to complete the last of the core elements of the proposal phase, in particular, rules related to the financial responsibility of security-based swap dealers and major security-based swap participants. The SEC also expects to complete joint rulemaking on the product definitions with the CFTC in the “very near term.”

The witnesses also discussed the global impact of these reforms. CFTC Gensler outlined the CFTC’s upcoming proposal on the cross-border application of Dodd-Frank swaps market reforms for the committee. Gensler yesterday introduced the upcoming proposal at the FINRA Annual Conference.

During the Q&A session following the testimony, both Schapiro and Gensler stated it is not their agencies’ desire to remove risk from the banking industry through these regulations, remarking banks have managed risk for the markets for years and do markets a great service by managing this risk.

Watch the hearing live.

Read SEC Chairman Mary Schaprio’s testimony.
Read CFTC Chairman Gary Gensler’s testimony.

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