CMC and the Dodd-Frank Act: One Year On

It was on July 21, 2010 that the Dodd-Frank Act was signed into law by President Barack Obama. It was of course an extremely wide-ranging Act that regulated the financial system in the United States, but CMC was especially focused on Title VII, the section that deals with derivatives.

For a comprehensive summary of the Act, please refer to this presentation by Davis Polk. For a specific update on Title VII rulemaking, please view the attached presentation from the Katten law firm. For an overview of the past year’s rulemaking on the Act as a whole, please refer to this presentation from Cicero Consulting and this article by K&L Gates. The U.S. Chamber of Commerce, which has been very active during the legislative and rulemaking process, also added to the summaries here, with a nice pictorial graphic depicting the rulemakings required of the various regulatory agencies here.

As you may recall, CMC was heavily involved in the legislative process when the Act was being discussed in Congress, and then in the regulatory process as the CFTC proceeded with its rulemakings. We submitted numerous comment letters, both individually as CMC, and jointly with other trade associations and working groups. Among the topics that our comment letters have covered are:

  • Margin requirements
  • Swaps data recordkeeping and reporting
  • Position limits
  • Bona-fide hedging
  • End-user exceptions
  • Risk management for DCOs
  • Treatment of agricultural swaps
  • Product and entity definitions
  • Market manipulation
  • Antidisruptive trade practices
  • ….. and many others

Because of the substantive nature of our comments, and the relationships we have developed with the political, media, policy and regulatory folks around town, CMC’s views were actively sought and heard on Capitol Hill and at the CFTC. On some of the above topics, we got what we asked for, whereas on others, the proposed or final rules didn’t incorporate our suggestions.

But today I want to mention three major accomplishments that CMC’s members can justifiably feel a sense of accomplishment about, and which don’t fit neatly into any one rulemaking category but rather are overarching and thematic in nature.

First, CMC has always been a strong and relentless advocate of getting the rules right rather than doing them hastily. As you may know, the CFTC has finally agreed to push back the effective dates for some of their rulemakings from July 16, 2011 to December 31, 2011.

Second, CMC has worked with other trade associations and congressional elected officials and staffers in providing questions to be asked of CFTC Commissioners during hearings; drafting or supporting letters from elected officials to the CFTC advocating our perspectives; and meeting with elected representatives and their staffs to educate them about why certain issues are important to us and elaborating on the rationales behind our points of view. These efforts have yielded success; as you may have noticed in the media, there is a regular stream of news about how Capitol Hill is asking tough questions of the CFTC.

Third, we have maintained the considered opinion that regulation of the swaps markets needs to be done with the global regulatory framework in mind. Excessive regulation in the United States, if not matched by foreign regulators in other jurisdictions such as Europe and Asia, will lead to the loss of capital and jobs from this country. The CFTC has taken heed of our warnings and decided to hold a comprehensive roundtable on this very subject in August.

All said and done, it has been a very busy twelve months for CMC members and staff since the Act’s date of passage. While a lot of work still needs to be done, and there are doubtless several provisions in the Act and its associated rulemakings that we are concerned about, we should pause and take just one moment to pat ourselves on the back for what we have accomplished working together.

To all our members and allies: A big “Thank You”! And we continue onward and upward!

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