Statement of Support by Chairman Gary Gensler
I support today’s final rulemaking on clearing which will promote market participants’ access to central clearing, increase market transparency, foster competition, support market efficiency, and bolster risk management. These rules include provisions on client clearing documentation, so-called ‘straight-through’ processing, bunched orders, and clearing member risk management.
These final rules have all benefited from broad public comment.
One of the primary goals of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) is to lower risks to the public by increasing the use of central clearing and to promote the financial integrity of the markets and the clearing system. These rules are an important step in furtherance of these goals.
First, the final rule does so by establishing requirements for the documentation between a Futures Commission Merchant (FCM) and its customers and between a Swap Dealer and its counterparties. This rule will foster bilateral clearing arrangements between customers and their FCM. The rule will promote competition in the provision of clearing services and swap liquidity to the broad public by limiting one FCM or Swap Dealer from restricting a customer or counterparty access to other market participants.
Second, the final rule does so by setting standards for the timely processing of trades through so-called ‘straight-through’ processing or sending transactions promptly to the clearinghouse upon execution. This lowers risk to the markets by minimizing the time between submission and acceptance or rejection of trades for clearing. These regulations would require and establish uniform standards for prompt processing, submission and acceptance for clearing of swaps eligible for clearing. Such uniform standards, similar to the practices in the futures markets, lower risk because they allow market participants to get the prompt benefit of clearing rather than having to first enter into a bilateral transaction that would subsequently be moved into a clearinghouse.
Third, the final rule does so by allowing asset managers to allocate bunched orders for swaps consistent with long established rules for allocating bunched orders for futures. This will help promote access to clearing of swaps for pension funds, mutual funds and other clients of asset managers.
Lastly, the final rule does so by strengthening the risk management procedures of clearing members. One of the primary goals of the Dodd-Frank Act was to reduce the risk that swaps pose to the economy. The final rule would require clearing members that are FCMs, Swap Dealers, and major swap participants to establish risk-based limits on their customer and house accounts. The rule also would require clearing members to establish procedures to, amongst other provisions, evaluate their ability to meet margin requirements, as well as liquidate positions as needed. These risk filters and procedures would help secure the financial integrity of the markets and the clearing system.
Last Updated: March 20, 2012