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June 7, 2013

Foreign derivatives push divides US regulator

“Brewing discord has burst into the open at a US regulator seeking to impose new rules on derivatives, suggesting a push to clamp down on cross-border transactions in the $633tn market will stall.

Three of the five commissioners at the US Commodity Futures Trading Commission publicly questioned the timeline for passing guidelines aimed to ensure that trading blow-ups at foreign branches or guaranteed affiliates of US banks do not hit the American taxpayer.

Their comments came as Gary Gensler, CFTC chairman, was in New York giving a speech Thursday outlining the need to pass the cross-border guidance so banks and hedge funds could not evade reforms “by setting up shop in an offshore locale, even if it’s not much more than a tropical island PO box”.

Mr Gensler needs a majority of the commission to pass the guidance. July 12 looms as a deadline, as an exemption from some transaction rules for foreign swap dealers such Deutsche Bank and foreign branches of US dealers such as JPMorgan Chase expires. The European Commission last week urged the CFTC to extend the exemption.”

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Read the full Financial Times article here

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