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July 3, 2013

CFTC and SEC Must Reject Calls from Congress to Delay Cross-Border Derivatives Regulation

CFTC and SEC Must Reject Calls from Congress to Delay Cross-Border Derivatives Regulation
“A June 27 letter to CFTC Chairman Gary Gensler and SEC Chairman Mary Jo White from 35 House Democrats, which called on the Commissions to halt work on their cross-border derivatives regulation proposals until they can harmonize their guidance with each other and with international regulators, fails to note material facts essential to a full and accurate understanding of the issues,” said Dennis Kelleher, President and CEO of Better Markets, Inc., a nonprofit organization that promotes the public interest in the financial markets.
“Better Markets sent a letter to Chairmen Gensler and White outlining these facts. The full letter is linked below, but these are the key points in summary. First, as a legal matter, the CFTC and the SEC are subject to fundamentally different statutory mandates. Second, the CFTC has jurisdiction over more than 96.5 percent of the derivatives markets, while the SEC oversees less than 3.5 percent. Third, the CFTC has been considering cross-border regulation for more than 2 ½ years, has received and reviewed more than 322 comment letters, and proposed its guidance a year ago, whereas the SEC only recently proposed its 650 page rule in May and will require a substantial amount of time to finalize its approach,” continued Kelleher.
“With respect to harmony between U.S. and foreign regulators, the House letter ignores several key points. First, the Dodd-Frank Act requires the CFTC to apply Title VII provisions to cross-border transactions, subject to the jurisdictional limitations set forth in the law. Second, both the CFTC and the SEC have already sought to promote harmony in international regulation by adopting the concept of ‘substituted compliance.’ Third, there are in fact no existing conflicts between U.S. derivatives regulation and foreign rules. Finally, any delay in finalizing the CFTC’s guidance or the SEC’s proposed rule on cross-border regulation will only expose U.S. taxpayers to unjustifiable risks, potentially for years to come,” Kelleher said.
“The CFTC should delay no more and the SEC should follow its process as appropriate. Neither should be held hostage to each other, or to the international regulatory process,” Kelleher concluded.
Better Markets is an independent, nonprofit, nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets. Better Markets advocates for transparency, oversight and accountability with the goal of a stronger, safer financial system that is less prone to crisis and failure thereby eliminating or minimizing the need for more taxpayer funded bailouts. To learn more, visit
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