Statement of Support on Three Final Rules and Two Proposed Rules Under the Dodd-Frank Act
Chairman Gary Gensler
July 19, 2011
Customer Clearing Documentation and Timing of Acceptance for Clearing
I support the proposed rulemaking for customer clearing documentation and timing of acceptance for clearing. The proposed rule promotes market participants’ access to central clearing, increases market transparency and supports market efficiency. This proposal will foster bilateral clearing arrangements between customers and their futures commission merchants. This proposal also re-proposes certain time-frame provisions of the Commission’s proposed rule in February related to straight-through processing.
Clearing Member Risk Management
I support the proposed rulemaking for enhanced risk management for clearing members. One of the primary goals of the Dodd-Frank Wall Street Reform and Consumer Protection Act was to reduce the risk that swaps pose to the economy. The proposed rule would require clearing members, including swap dealers, major swap participants and futures commission merchants to establish risk-based limits on their house and customer accounts. The proposed 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 and protect customer funds.
Process for Review of Swaps for Mandatory Clearing
I support the final rulemaking to establish a process for the review and designation of swaps for mandatory clearing. One of the primary goals of the Dodd-Frank Wall Street Reform and Consumer Protection Act was to lower risk by requiring standardized swaps to be centrally cleared. The final rule is consistent with the congressional requirement that derivatives clearing organizations be eligible to clear swaps and that the public has an opportunity for input before a swap is subject to mandatory clearing.
Process for Registered Entity Rule Submissions (Part 40)
I support the final rulemaking to establish a process for the certification and approval of new rules and rule amendments for designated contract markets, derivatives clearing organizations, as well as new registrants, swap execution facilities and swap data repositories. The Dodd-Frank Wall Street Reform and Consumer Protection Act establishes enhanced CFTC review and certification of new rules and amendments. Today’s final regulations provide important procedural guidance to registered entities on how to comply with Congress’s mandate for the Commission’s review of new rules and rule amendments.
Removing References to Credit Ratings in Commission Regulations
I support the final rulemaking to remove references to credit ratings within the CFTC’s regulations. Under Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress required the Commission to review credit rating references in our existing regulations and remove reliance upon them. The rule removes them from Regulation 1.49, which limits the types of non-U.S. banks in which futures commission merchants and derivatives clearing organizations may place customer funds. The rule also removes them from Regulation 4.24, which requires commodity pool operators to disclose to their customers where they are putting customer money. Other references included in Regulations 1.25 and 30.7 will be taken up when the Commission considers the proposed rulemaking related to investment of customer funds.
Last Updated: July 19, 2011