* Reed senses no "outcry" for delaying Dodd-Frank on swaps
* Reed backs carrying on with SEC, CFTC implementation
By Kevin Drawbaugh
WASHINGTON, May 25 A key U.S. Senate Democrat
on Wednesday told Reuters he saw no need to postpone
implementation of new rules for the swaps market.
One day after a U.S. House of Representatives panel voted
to do just that, Senator Jack Reed backed an implementation
process that is now under way at the Securities and Exchange
Commission and the Commodity Futures Trading Commission.
"My sense is we just have to move as the SEC and CFTC are
moving, deliberately and responding to the industry," Reed said
in an interview after a Senate subcommittee hearing he chaired
with officials from the $600 trillion market.
Reed said their testimony was representative of clearing
platforms, end-users and others in the market for swaps and
over-the-counter derivatives, which is largely unpoliced.
"There was no outcry to stop it or postpone it," Reed said
regarding a raft of new regulations mandated under 2010's
Dodd-Frank Wall Street reforms.
"What they want to do is to move deliberately and in
appropriate sequence. As some indicated, the longer we wait
with this structure not implemented," the more uncertainty
develops in the marketplace, he said.
The first comprehensive U.S. regulation of the swaps market
is on track to be implemented this year. But it would be
delayed until September 2012 under a bill approved by the
Republican-controlled House Financial Services Committee amid
pressure from market players to slow down the process.
The Republican-controlled House Agriculture Committee voted
on May 4 for an 18-month delay in swap-market regulation.
The new rules will require derivatives to go through
clearinghouses and trade on exchanges as much as possible, with
more disclosure and reporting also required.
The GOP postponement measures were not expected to become
law since Senate Democrats and the White House oppose them.
Reed, the No. 2 Democrat on the Senate Banking Committee,
chairs the subcommittee that oversees swaps and played a lead
role in writing the Dodd-Frank swap rules.
The sweeping Dodd-Frank reforms were approved last year in
reply to the 2007-2009 financial crisis, which was amplified
globally by unregulated credit default swaps and derivatives.
Swaps are financial contracts traded in private dealings
among Wall Street banks and commercial corporations.
Wall Street banks make a lucrative business in arranging
swap transactions and in speculating on swap contracts.
With the banks as intermediaries, businesses, known as
end-users, buy and sell swaps to hedge against changes in costs
for fuel and raw materials, among other business expenses.
The swaps market is dominated by a handful of giant
financial firms, including JPMorgan Chase (JPM.N), Goldman
Sachs (GS.N), Citigroup (C.N) and Bank of America (BAC.N).
Dealers in the market earn about $55 billion in annual
revenue from over-the-counter derivatives trading, said Benn
Steil, director of international economics at the Council on
Foreign Relations, at the hearing.
"It is natural, therefore, that dealers should resist a
movement in trading activity onto exchanges and
clearinghouses," Steil said.
(Reporting by Kevin Drawbaugh, editing by Matthew Lewis)