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Legislative Updates: August 2010


Capitol Call

Some might find it ironic that President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act on July 21 at the Ronald Reagan Building, which is much larger than the White House where the President usually signs new legislation. President Reagan, who once said "a government bureau is the nearest thing to eternal life we'll ever see on this earth," generally advocated for smaller government. Many opponents of the legislation argued that the Dodd-Frank bill represents a substantial growth in government involvement and an increased regulatory burden.

Whatever your view, the large venue was necessary because so many of the legislation's supporters wanted to celebrate their victory. Democratic lawmakers flanked President Obama on stage as he signed the legislation, with several hundred liberal and consumer activists looking on as the legislation was officially added to the books.

The regulatory agencies have a lot of work to do in order to write the 243 rules and 78 studies required under the legislation. To put that into perspective, consider that for a single rule to be implemented it must be promulgated by the relevant agency (SEC, CFTC, etc.), published in the Federal Register, opened for public comment (from 30 to 180 days), occasionally be considered in a formal hearing and then voted on before the final rule (again published in the Federal Register) takes effect, which is usually several months later giving the regulated parties time to come into compliance. As a result some rules take years to be implemented with the minimum being about 180 days.

Given the cumbersome and time-consuming process for rulemaking it is remarkable that CFTC Chairman Gary Gensler recently indicated that he expects the 100 or so rules that the CFTC must promulgate to be completed by this Thanksgiving. The CFTC currently averages 2 to 4 rulemakings per quarter, so it will be quite extraordinary if his agency does indeed promulgate more than 100 rules in the next four months. Luckily, many of the rules the CFTC must adopt are due within 360 days of enactment, so he has some leeway.

With a large task ahead, both the CFTC and SEC could use additional staff, despite Congress' efforts to rein in spending. Congress has recognized the need to invest in the CFTC and SEC so that the agencies have the tools they need for their new oversight powers. The House and Senate recently passed their respective appropriations bills that fund the CFTC and SEC and gave the agencies a significant bump in funding. The two versions of the funding bill still have to be reconciled and signed into law, but both agencies will likely receive at least $100 million more than they did last year.

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