US CFTC “out of step” with other regulators-Sommers

 

Mon Mar 7, 2011 8:00pm GMT

 

* CFTC needs to quantify costs of its new rules – Sommers

* Swap execution rule goes beyond SEC, EU versions

* Position limit plan more extensive than EU proposal

By Roberta Rampton

WASHINGTON, March 7 (Reuters) – The U.S. futures regulator is going too far and too fast toward pushing swaps onto new trading platforms, one of its top officials said on Monday.

The Commodity Futures Trading Commission’s proposed rule on swap execution facilities, which is open for public comment until Tuesday, is inconsistent with proposals by the Securities and Exchange Commission and international regulators, said Jill Sommers, a CFTC commissioner.

“One of my primary concerns is that the CFTC is moving out of step in time, substance, or both with the SEC and the rest of the world in implementing trade execution requirements for standardized swaps,” Sommers said in a speech to the Institute of International Bankers.

The Dodd-Frank financial reform law requires more over-the-counter swaps to trade on exchanges or new swap execution facilities, or SEFs, to increase transparency in the formerly opaque market.

The CFTC has proposed that new SEFs send requests-for-quotes on trades to at least five swap dealers, while the SEC would allow a request to go to a single dealer, depending on the customer’s wishes.

The European Commission is still in the early stages of considering a proposal that would allow for single-dealer platforms, a “fundamentally different” model than the CFTC’s proposal.

“I support the more flexible approach being considered elsewhere,” said Sommers, a Republican commissioner who voted against the proposal when it was first unveiled.

Sommers said she hopes the CFTC will adopt a more flexible regulation. After the comment period ends, the agency will consider whether changes are needed, and commissioners will need to vote again to finalize the plan.

Sommers, who has objected to a number of rules proposed by the CFTC, also said the agency’s plan for position limits for energy, metals and agricultural commodities goes beyond what international regulators are considering.

The European Commission has proposed giving national regulators in the European Union the option of setting position limits, but may only require the limits for farm products.

A plan for ownership restrictions for clearinghouses and SEFs also go beyond European proposals, and “may do more harm than good,” Sommers said.

The CFTC needs to do a better job analyzing the costs and benefits of their proposed rules, Sommers said.

“The proposals we have issued thus far contain cursory, boilerplate cost-benefit analysis sections in which we have not attempted to quantify the costs,” she said.

“We owe the American public more than the absolute minimum,” she said.

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