CFTC’s Gensler Says Swap Rules Need International Consensus

By Silla Brush and Jim Brunsden, Bloomberg

Effective oversight of the $583 trillion global swaps market hinges on cooperation between regulators drafting new rules in the U.S. and Europe, Commodity Futures Trading Commission chairman Gary Gensler said.

“Effective reform cannot be accomplished by one nation alone,” Gensler said in a speech to lawmakers at the European Parliament in Brussels today.

U.S. and European Union regulators oversee a “significant majority” of the swaps market and must “find general consensus” on derivatives regulations, Gensler told members of the EU Parliament’s Economic and Monetary Affairs Committee. Convergence of rules is “critical” he said, in response to questions from lawmakers.

Regulators are drafting rules governing the derivatives market after largely unregulated transactions helped fuel the 2008 credit crisis. The CFTC and Securities and Exchange Commission are leading U.S. efforts, required under the Dodd- Frank Act, that seek to reduce risk and boost transparency by having most swaps guaranteed by clearinghouses and traded on platforms such as exchanges.

The EU’s focus only on derivatives traded away from exchanges may lead to gaps in regulation in the region compared with the U.S, Gensler said.

“The U.S. law covers all swaps, all derivatives,” Gensler said. The “idea is not to have an arbitrage that some things are in and some things are out,” he said, without elaborating.

Comparable Rules

U.S. lawmakers have tasked regulators with determining whether other nations should be recognized as having rules that are “comprehensive and comparable” with those in the U.S., Gensler said.

“I would fear that if you were only covering part of the marketplace it would be harder to make that determination,” Gensler said. It would be a “fairly critical point.” He didn’t specify what the consequences of non-comparability would be.

EU regulators are also looking for “comparability” from other nations “for Europeans to use data repositories or to use clearing houses” located there, he said.

The EU proposals concern so-called over-the-counter derivatives, those traded outside of regulated platforms.

The global market for such trades was $583 trillion as of last June, according to the Basel-based Bank for International Settlements.

Out of Step

CFTC Commissioner Jill E. Sommers said March 7 in a speech delivered to a meeting of the Institute of International Bankers that the agency’s derivatives-trading rules have put it “out of step” with other U.S. and overseas regulators.

A CFTC proposal for new swap execution facilities doesn’t provide the same flexibility as a proposal from the SEC or rules under discussion in Europe, Sommers said.

Differences in trading regulations may lead banks and other market participants to shift where they conduct business, according to a Feb. 18 report from a technical committee of the International Organization of Securities Commissions. IOSCO, based in Madrid, is a forum for securities regulators to set international standards.

To contact the reporters on this story: Silla Brush in Washington at; Jim Brunsden in Brussels at

To contact the editors responsible for this story: Lawrence Roberts at; Anthony Aarons at


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