February 27, 2012

CFTC member requests review of Dodd-Frank derivatives rule

From: BankCreditNews.com

A member of the Commodity Futures Trading Commission requested last Thursday that the Office of Management and Budget review Dodd-Frank derivatives rules, saying that the rules have not undergone sufficient analysis.

Scott O’Malia, one of two Republican members of the CFTC’s five member board, wrote a letter to the OMB’s acting director saying that the CFTC has not been able to conduct a full, proper cost-benefit analysis of the proposed rules and their alternatives.

“The [CFTC] has failed to carefully and precisely identify a clear baseline against which the commission measured costs and benefits and the range of alternatives under consideration,” O’Malia wrote in the Feb. 24 letter, Bloomberg reports.

O’Malia’s request, approved in a 3-2 vote, called for a review of CFTC regulations regarding record-keeping and conduct standards for those participating in swaps.

The proposal to review the derivatives rules came just one day after the regulatory agency voted to examine a different proposal that determines which trades are substantial enough that a public reporting delay would be instituted. Before the crisis, swaps were generally unregulated and not reported to the government because the trades did not occur on public exchanges, a lack of transparency that regulators intend to remedy.

Under the Dodd-Frank Act, swaps must be traded on exchanges or similar platforms and must be guaranteed by clearinghouses. The CFTC, in coordination with the Securities and Exchange Commission, is spearheading efforts to regulate the derivatives market following its role in the 2008 financial crisis.

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