3-Margin rule should focus on banks-CFTC’s Gensler

By Roberta Rampton and Christopher Doering

WASHINGTON, Feb 9 (Reuters) – The U.S. futures regulator’s
long-awaited rule on margin requirements for swaps should focus
on swaps between banks and not businesses using the instrument
for hedging, its chairman said in testimony released on
Wednesday.

Republican lawmakers at a hearing on Thursday plan to
scrutinize new costs for manufacturers, farmers and other types
of “end user” businesses that use derivatives to hedge their
risks. The upcoming regulation on capital and margin
requirements is a key concern.

The Commodity Futures Trading Commission is working on the
regulation as part of its detailed and complex plan to take
oversight of the swaps market, worth about $600 trillion
globally. The CFTC will require many swaps to be cleared and
traded on exchanges or other platforms.

In remarks prepared for the hearing and released by the
House Agriculture Committee, CFTC Chairman Gary Gensler said
margin requirements would be aimed at swap dealers, not end
users, who are exempt from clearing requirements.

“Proposed rules on margin requirements should focus only on
transactions between financial entities rather than those
transactions that involve non-financial end users,” Gensler
said.

Gensler and other regulators also were warned this week by
a group of 13 U.S. senators to move cautiously on Dodd-Frank
rules to avoid hurting end users or the fragile U.S. economy.

Failing to do so “could stunt needed economic growth and
produce higher costs for consumers,” said the lawmakers,
including Democratic Senators Max Baucus and Jon Tester and
Republican Mike Johanns.

Continue reading here.

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