CMC Attends IIB Event with Asst. Treasury Secretary Lago

Earlier this week, CMC attended an event hosted by the Institute of International Bankers (IIB) featuring the US Treasury’s Assistant Secretary of International Markets and Development, Marisa Lago.  Ms. Lago spoke on a variety of topics, including derivatives, within the realm of global financial regulation.  She said that international coordination on derivatives regulation is very important to ensure that no jurisdiction regulates these instruments in a lax manner.  The US government and regulators, she said, are well on schedule for completing all their derivatives related rules by the end of 2012.

Ms. Lago informed attendees that the Financial Stability Board (FSB) has taken up Treasury Secretary Geithner’s proposal for international standards on margin requirements on uncleared derivatives transactions.  This is a recent agenda to the G20 agenda.  She also said that Secretary Geithner has made a Legal Identity Identifier (LII) proposal to the FSB to uniquely identify each individual derivatives transaction for recordkeeping, reporting and auditing purposes.  Ms. Lago claimed that this proposal has private sector support and is being discussed by the FSB.

CMC Attends IIF Annual Meeting

Over this past weekend, CMC attended the annual meeting of the Institute of International Finance (IIF) as a special invitee, having contributed to that organization’s position paper on derivatives regulatory policy. The paper, in which CMC’s help has been graciously and formally acknowledged, was on prominent display at the meeting, and many of the over 1,000 attendees took away copies (the IIF ran out of copies despite printing several hundreds). The stimulating panel discussions at the meeting were both wide and deep in their content, covering various aspects of global financial reform, monetary policy and fiscal policy. In addition, the venue also provided an excellent networking opportunity for CMC to liaise with senior international financial services executives and government officials. Being associated with the IIF is a positive for CMC, both because the IIF is expanding its commodity derivatives policy coverage and because it is a well-known institution with a broad reach that is playing an instrumental role in resolving the European debt crises.

Senior Senate Agriculture Committee Staffer Addresses CMC Members on Policy Call

Gregg Doud, Senior Professional Staff at the Senate Agriculture Committee Republicans, addressed CMC members on our policy call yesterday.  He spoke mainly about financial regulatory reform pertaining to derivatives, but also briefly discussed budgetary matters, the farm bill, congressional politics, and Senate confirmation votes.  Gregg provided a comprehensive briefing on the aforementioned topics, and CMC members had the opportunity to directly ask him several questions.

Australian Financial Review Seeks Meeting with CMC

CMC met with the Washington Bureau of the Australian Financial Review, Australia’s largest financial and business newspaper, to discuss financial regulatory reform in various jurisdictions. We spoke about our concerns regarding the US moving far ahead of other geographies in regulating derivatives.

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!

CMC Meets with the Confederation of British Industry

CMC met with a senior executive from the Confederation of British Industry (CBI).  The CBI has 240,00 members – essentially companies of various sizes that operate in the U.K.  Their staff in Brussels has been active in lobbying European legislators and the European Commission on derivatives issues, from both the end-user and financial services perspectives.  CMC and CBI discussed the differences between Dodd-Frank-related rulemaking being promulgated by the CFTC and the rules being adopted by European regulators (e.g. the U.K. will not be imposing position limits, Europe does not have a “Volcker Rule” provision, the political rhetoric against speculation is strident in France, etc).

CMC Meets with General Electric Government Relations

CMC met with an executive in GE’s Government Relations team.  Being the massive conglomerate they are, GE is interested in derivatives regulation from an end-user perspective and a financial services perspective.  We briefed them on the issues of interest that CMC is working on right now as pertains to Title VII of the Dodd-Frank Act (position limits, margin requirements, bona-fide hedging, affiliate transactions, product and entity definitions, etc).  They echoed CMC’s opinion that it is essential for large companies that have operations in various countries to be very mindful of the financial regulatory and political/legislative processes in multiple jurisdictions other than their own home base.

CMC Meets with Sen. Scott Brown’s Staff

CMC met with Senator Scott Brown’s Legislative Director today. Although Sen. Brown (Republican – Massachusetts) does not sit on the Banking or Agriculture Committees, he is very interested in derivatives issues because many of his constituent firms in Massachusetts (especially financial companies) are heavy users of derivatives. Being a moderate Republican, he is also a very important swing vote in the Senate on several pieces of legislation. CMC discussed the following issues at a broad 30,000-foot level with the staffer: position limits and bona-fide hedging, and international co-ordination of derivatives regulations across various jurisdictions. Sen. Brown’s office is also very interested in forex swaps, and expressed an interest to continue an ongoing discussion with CMC on that topic.

EU lawmakers ban “speculative” derivatives trades

STRASBOURG, France | Mon Mar 7, 2011 8:07pm GMT

STRASBOURG, France (Reuters) – EU lawmakers have approved a ban on some trading in debt insurance derivatives from 2012 to curb what some policymakers say is speculation that deepens the euro-zone debt crisis.

Monday’s vote marks the first milestone in bringing the hotly-disputed measure onto the bloc’s statutes.

The European Parliament’s economic and monetary affairs committee approved by a 34-to-8 vote a draft law from the European Union’s executive European Commission.

The broad, cross-party majority means the assembly is in a strong position to negotiate with EU states, who have joint say on the final version of the measure. EU finance ministers, who have been split over key elements, meet next week.

Green Party lawmaker Pascal Canfin, who is steering the measure through the assembly, said sovereign debt speculation is still causing chaos in the euro zone.

“Banning uncovered credit default swaps (CDS), which allow market players to speculate on sovereign debt of European countries, would be a major step forward,” Canfin said.

Hedge funds and other investors have been accused of using so-called naked CDS to bet on falls in government bond prices.

A naked CDS is where the person buying the CDS does not own the underlying sovereign debt being “insured” against.

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