CFTC and SEC Roundtable Contentious
As we noted, the SEC and CFTC held a joint roundtable on August 20, 2010 addressing governance and conflicts of interest on clearing and listing of swap transactions. Gary Gensler, Chairman of the CFTC issued a statement which stated “Today’s public roundtable will help us as we move forward to write rules on the important matters of governance of clearinghouses and trading facilities and how to best protect their decision making from conflicts of interest. I thank the CFTC and SEC staffs who worked cooperatively and constructively to plan and execute today’s roundtable. We will continue to collaborate closely with the SEC and other Federal regulators as we draft rules to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act. We look forward to hosting several more roundtables along with the SEC on other important matters related to the Act.”
Beyond that statement, there appears to have been little agreement in this highly contentious rule making effort resulting from the Dodd-Frank Act. The Wall Street Journal (subscription required) noted that it was standing room only at the meeting.
Parts of the debate appeared to center on ownership of any clearing and trading facilities required by the Dodd-Frank Act. According to press reports, Swaps and Derivatives Market Association Vice Chairman Jason Kastner told regulators at a public meeting “If we put stuff into a clearinghouse and the clearinghouse has the same five guys in the room and the biggest three of them start to wobble, it’s going to be back to Congress with a one-pager asking for $750 billion.”
Others suggested diversified ownership of clearing and trading facilities would not serve the goals of the Dodd-Frank Act. A representative of a large financial institution stated “They have to be able to trade very large amount of highly complex illiquid OTC derivatives, and if they can’t do that, by introducing them as a member into the clearinghouse you actually increase risk in the clearinghouse.”
Contact Steve Quinlivan for more information.