BOCA RATON, Florida (Reuters) - The futures regulator will begin finalizing rules for the over-the-counter swaps markets in spring but will miss July deadlines for many regulations set by financial law reforms, its chairman said.
Gary Gensler on Wednesday sought to appease critics in the industry and on Capitol Hill who have said the Commodity Futures Trading Commission unveiled its rules in a hurried jumble, making it hard to assess the impact on swaps trade, worth about $600 trillion globally.
The CFTC will try to first finalize rules defining swaps dealers and major swaps participants early in the process -- who will be subject to the toughest scrutiny under the law -- as well as “end users” who will be exempt from requirements to clear trades, Gensler told a Futures Industry Association conference.
Gensler said the agency would try to finalize the rules in three tranches, noting the schedule is not set in stone. He hoped to finish the process in the fall. Gensler said he wants to hear from the four commissioners who lead the agency, the industry, and lawmakers.
“I think that ought to alleviate a lot of the concerns I’ve heard from people,” Michael Dunn, a Democratic commissioner, told Reuters after Gensler’s speech.
The Dodd-Frank financial regulatory reform law gave the CFTC the lion’s share of authority to police over-the-counter derivatives, blamed for helping accelerate the financial crisis.
The CFTC scrambled to propose more than 40 new, detailed regulations to put the law into effect, drawing fire from lawmakers like Frank Lucas, chairman of the House Agriculture Committee.
“I think the challenge is we’re in too much of a hurry,” Lucas told Reuters at the Food and Agriculture Summit on Wednesday. “This is such a huge market -- trillions of dollars -- we need to get it right.”
Gensler told the FIA the agency hopes to finalize rules in three clusters and may consider phasing in the effective dates of regulations by asset class.
But the pace might still be too fast, particularly for a large middle tranche, said Scott O‘Malia, a Republican commissioner.
“If we did two a week, that’s 10 weeks of that middle bunch, that will kill us, it’ll kill the staff, it’ll kill everybody,” O‘Malia told reporters. “Unlike the first round, this matters, we’ve got to get it right.”
The CFTC still has yet to unveil the types of swaps products covered by the sweeping regulations and capital and margin requirements for swap dealers and major swap participants, and won’t likely finalize those rules until the fall, Gensler said.
Jill Sommers, a Republican commissioner, said she was disappointed Gensler placed the swaps definition as one of the final items.
“I‘m not convinced there’s something that seems more logical than definitions first,” Sommers told Reuters.
In his speech, Gensler stressed that the commissioners -- who have openly disagreed on many of the proposed regulations -- would be consulted for their input before being asked to vote on a final version.
“He has to get three votes, so that’s a logical step,” Sommers said. “In some cases, we were being consulted on rules that had already been written, and we had very little input, -- and in some cases, no input -- into proposals.”
Additional reporting by Ann Saphir and Jonathan Spicer in Boca Raton, and Charles Abbott in Washington, Editing by Andrew Hay