November 19, 2010 / 5:09 PM / in 9 years

CFTC drafts swap rules for reporting, repositories

WASHINGTON (Reuters) - The following are highlights from a U.S. Commodity Futures Trading Commission hearing on Friday on new regulations for over-the-counter derivatives markets, including measures requiring trades to be reported in real-time, and guidelines for repositories charged with storing the data.

Speakers at the hearing include Chairman Gary Gensler and commissioners Michael Dunn, Jill Sommers, Bart Chilton and Scott O’Malia.

GENSLER ON BLOCK TRADE REPORTING RULES

An important feature regarding “block trades or trades of large notional size is a reporting method that transactions greater than $250 million notional amount - even the very largest of trades - will just be reported as being greater than $250 million.”

“This will protect anonymity and promote the liquidity of these large trades.”

O’MALIA ON “REAL-TIME” REPORTING:

“I am disturbed by a footnote in the rulemaking preamble that admits that there is a lack of public information regarding how market liquidity might be impacted by the proposed real-time reporting rule.”

“I find this ‘shoot first, ask questions later’ approach to be problematic. I cannot support this rulemaking as drafted.”

SOMMERS ON PROCESS OF IMPLEMENTING RULES

“I do have a number of concerns. My concerns are both substantive and also with regard to process we’re in, because of these tight statutory deadlines and trying to get all of this done by the dates we’re trying to do.

People are having trouble trying to follow what we’re doing. I might be having trouble following what we’re doing. It’s a lot to keep up with. I’m not sure this process is sustainable through finalizing some of these rules.”

SOMMERS ON COORDINATION WITH SEC

“I think it’s key with the proposals we’re putting out today ... to make sure we’re consistent with what SEC is doing and to talk about and deliberate how important that is.

Is it important for our rules that we put out today to be almost identical to what the SEC is doing or do we need to just try to be consistent?”

O’MALIA ON REAL-TIME REPORTING PROPOSAL

“I am not convinced we are doing the best thing by mandating a 15-minute time limit to report block trades and large notional swap trades between dealers and end users, while providing little to no direction on the reporting of all remaining trades.”

“This proposal merely repeats the vague statutory direction provided in the Dodd-Frank Act.”

CHILTON ON IMPLEMENTING FINANCIAL REFORM LAW

“For me, when the smoke clears, there is a singularity of purpose when it comes to implementation of the Wall Street Reform and Consumer Protection Act, and that is: do what Congress told us to do.”

“I am not interested in finding ways (nor do we have the authority) to delay, defer, modify, or in any way alter the path set by Congress.”

DUNN ON PACE OF NEW RULES

“You have all heard the phrase “too big to fail” - and just last week Commissioner O’Malia coined the term “too costly to clear” - but my concern is whether we are moving “too fast to follow.”

“Our ambitious deadlines call for us to complete almost every rule Dodd-Frank requires by July 15, 2011. However, the rest of the world is not working at this pace.”

Washington commodities desk, +202 898 8376

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