November 11, 2010 / 2:53 PM / in 8 years

CFTC sets sweeping rule timelines as clock ticks

NEW YORK (Reuters) - The U.S. Commodity Futures Trading Commission expects to unveil a series of draft rules within a month, including real-time reporting of swaps trades next week and possibly the long-awaited commodities market position limits on December 1, its chairman said on Thursday.

Gary Gensler said the agency would consider a host of major rules at a November 19 meeting, the CFTC’s fifth so far as it races to craft a series of 50-60 regulations to implement its share of the Dodd-Frank Wall Street reform law.

Gensler — on a whirlwind speaking tour across the country in the last few months with pit-stops for meetings back in Washington DC — was cautious about deadlines as he sketched more of the CFTC’s tight schedule through the end of the year.

“We’re human, there’s a lot of sorting through and consulting with other agencies and with the public,” he told reporters after addressing a Practicing Law Institute conference. “It’s just a reality that we also have somewhat of a flexible plan.”

Wall Street is keenly interested in the shape and timing of the CFTC’s proposals. Swift reporting of large “block” swaps trades, as well as the crackdown on speculation in the energy and metals markets, could revamp its lucrative trading businesses and hurt revenues.

The law gives the CFTC oversight of the $615 trillion over-the-counter derivatives market, and aims to cut risks and increase transparency by mandating that most swaps trades pass through clearinghouses and trade on exchanges or other venues.

The agency will also consider rules on November 19 for swap data repositories and segregation of customer funds for non-cleared swaps, Gensler told the conference.

It will release draft rules for exchanges and swap execution facilities (SEFs) in December, Gensler said. The agency has a meeting slated for December 1 and will likely hold another two hearings in December.

The CFTC has “internally calendared” to discuss the position limit plan at the December 1 meeting, Gensler told reporters. “We’ll do our best to take it up” then, he said.

The sweeping reform law mandated the limits as a way to crack down on speculative trading and curb inflation of commodity prices by funds and other investors.

Traders, futures exchanges and others have warned that too-restrictive limits could drive trade offshore.

Other big-ticket regulations still to be unveiled include details for an exemption from clearing and associated margining costs available to non-financial businesses that use swaps to hedge their commercial risk: so-called “end users”.

Defining that end-user group was a flashpoint for Congress as it wrote the law, and it is now up to the CFTC to provide more details on who will be able to use the exemption.

Elsewhere, the CFTC and the Securities and Exchange Commission must decide how to protect against a repetition of the May “flash crash”, in which the Dow Jones industrial average briefly plunged nearly 700 points after liquidity rapidly dried up in futures and stock markets.

Gensler said he hoped to hear recommendations from a joint CFTC-SEC flash crash committee in January.

The chairman noted he had given 50 or 60 speeches in the last year and a half, and that the agency had 247 days left to enact its Dodd-Frank mandate.

Additional reporting and writing by Christopher Doering and Roberta Rampton in Washington; Editing by Dale Hudson

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