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Legislative Updates: July 2011


Capitol Call

CFTC Chairman Gary Gensler must be one of the busiest men in Washington. For example, in just three days (June 14, 15 and 16) he chaired a CFTC public meeting on the effective dates of Title VII of Dodd-Frank, testified before the Senate Agriculture Committee on Title VII implementation and appeared before a House Financial Services Committee hearing on international regulatory coordination.

Clearly he and his staff are putting in long hours, because the CFTC has held more than a dozen open meetings on Dodd-Frank proposed rules. Chairman Gensler believes that CFTC is a "good investment" for the American public, and he often tries to convince skeptical Republican lawmakers to give his agency a higher appropriation total.

Of course, there are those who oppose all the work of his agency. Many House Republicans believe the regulatory agencies, and the CFTC in particular, are creating too many rules too quickly and that the sheer volume of rules has made it difficult for stakeholders, such as end-users, exchanges and clearinghouses, to participate in the rulemaking process. They would likely prefer him to slow his pace down a bit.

June did indeed bring a regulatory slowdown. On the eve of Dodd-Frank’s first anniversary, the SEC and CFTC found themselves unable to complete even a fraction of the rules they were required to finalize by July 16. To solve this problem, the SEC and CFTC agreed to delay the requirements under Title VII that were to go into effect 360 days after Dodd-Frank was signed, many of which affect those who use and trade derivatives.

Basically, in an effort to prevent legal uncertainty regarding the applicability of the rules in question, the SEC and CFTC told market participants they don't need to comply with the new regulatory framework for at least six months. Because the stakes are so high, both the House and Senate will be watching the SEC and CFTC very closely and will likely hold oversight hearings concerning this important issue in the coming months.

The action by the CFTC and SEC all but negates the likelihood of passage of H.R. 1573, which would have done practically the same thing but with an 18-month delay instead of six months. As discussed last month, the measure passed the House Financial Services and Agriculture Committees but has yet to be considered by the full House. Leadership has given no indication that the House will consider the bill anytime soon, and the Democratic-controlled Senate is even less inclined to take it up.

On other fronts, the Senate Agriculture Committee held a hearing last month on Title VII implementation. In her opening statement, Chairman Debbie Stabenow (D-Michigan) said that her concerns about Title VII are that rules must reflect congressional intent, the ability to manage risks must be preserved, competitive markets need to be fostered, and international harmonization must be promoted so that market reform is not undermined. She and Ranking Member Pat Roberts (R-Kansas) recently sent a letter to their European counterparts detailing their concerns with harmonization efforts, specifically the different timelines of implementing regulatory reform and the differences in the rules themselves.

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