Statements of Support by Chairman Gary Gensler
Investment of Customer Funds
I support the final rule to enhance customer protections regarding where derivatives clearing organizations (DCOs) and futures commission merchants (FCMs) can invest customer funds. I believe that this rule is critical for the safeguarding of customer money.
The Commodity Exchange Act in section 4d(a)(2) prescribes that customer funds can only be placed in a set list of permitted investments. From 2000 to 2005, the Commission granted exemptions to this list, loosening the rules for the investment of customer funds. These exemptions allowed FCMs to invest customer funds in AAA-rated sovereign debt, as well as to lend customer money to another side of the firm through repurchase agreements.
This rule prevents such in-house lending through repurchase agreements. I believe there is an inherent conflict of interest between parts of a firm doing these transactions. The rule also would limit an FCM’s ability to invest customer money in foreign sovereign debt.
In addition, this rule fulfills a Dodd-Frank requirement that the CFTC remove all reliance on credit ratings from its regulations.
I support the final rule to implement a registration system for Foreign Boards of Trade (FBOTs) seeking to make futures and swaps contracts directly available to U.S. market participants. This registration system replaces the Commodity Futures Trading Commission’s current practice of staff issuing no-action letters to FBOTs to permit them to provide such direct access for futures contracts. Importantly, the registration system will bring consistency, standardization and transparency – both for applicants and the public – to the process. In order to directly access U.S. market participants, the FBOTs and their clearing organizations must be subject to comparable and comprehensive supervision and regulation in their home countries and meet certain standards in the rule.
Process for Making a Swap Available to Trade
I support the proposed rule to implement a process for designated contract markets (DCMs) and swap execution facilities (SEFs) to make a swap “available to trade.” The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that swaps subject to the clearing requirement be traded on a DCM or SEF, unless no DCM or SEF makes the swap available to trade or the swap transaction is subject to the end-user exception. This proposal will bring transparency to the process for making a swap available to trade on a DCM or SEF. It also will provide appropriate oversight of the process through Commodity Futures Trading Commission review.