WASHINGTON Oct 5 Lawmakers and a regulator on
Friday took steps to help assauage swap players' concerns about
complying with confusing rules that are set to take effect on
Democratic Commissioner Bart Chilton of the Commodity
Futures Trading Commission told reporters that swaps players,
are unlikely to face enforcement actions before they get answers
to their questions about the swaps rules.
"If we don't respond to them, there is no way I can envision
the agency taking an action against them," he said, adding he
expected the agency to address some of the inquiries over the
next few days.
The rules are mandated by the 2010 Dodd Frank financial
reform that seeks to boost oversight of the $648 trillion
over-the-counter swaps market, which was implicated in the
2007-2009 financial crisis.
The October deadline was triggered when the CFTC published a
final version of its definition of "swap," setting the clock on
the reforms, even though other related rules have yet to be
Confusion over rules has prompted a flurry of petitions from
lawmakers and the industry to the CFTC, which was given the task
of drafting most of the rules.
Others have sent letters elsewhere.
In a letter dated Oct. 5, Republican Reps. Frank Lucas,
Spencer Bachus, Michael Conaway and Scott Garrett urged Treasury
Secretary Timothy Geithner to delay implementation or provide
relief from the rules, which they say could harm the
competitiveness of U.S. firms or damage the economy.
They highlighted new powers that Geithner has as chairman of
the Financial Stability Oversight Council, a group of regulators
that is authorized to monitor the stability of financial
"We are hopeful that the FSOC will not allow an inflexible
implementation of new rules to needlessly disrupt the U.S.
derivatives marketplace," they wrote.
Bachus and Lucas head up committees that oversee the CFTC.
Among the toughest rules that are scheduled to kick in next
week is one that requires traders to begin counting their swaps
transactions to see if they reach an $8 billion threshold, which
tags them as a "swap dealer." Such firms face the toughest
rules, like capital requirements to back trades.
But firms that have only $25 million in total swaps trading
with public utilities also get tagged. The aim of this lower
threshold was to protect public utilities, by toughening up
oversight of banks that deal with them.
But the lawmakers raised concerns voiced by utilities that
the threshold will deter banks from trading with them at all,
limiting their ability hedge risk and forcing them to pass
higher costs on to consumers.
"These new rules will harm America's economic engine by
impairing many of the companies that provide vital financing to
consumers and American businesses," they wrote.
Sources familiar with the matter say the CFTC is reviewing
this and other issues posed by the Oct. 12 deadline.