CFTC Set to Vote on Rules for Derivatives Clearinghouses

The Commodity Futures Trading Commission will vote Oct. 1 on new rules for derivatives clearinghouses and a reporting deadline for outstanding swaps trades, CFTC Chairman Gary Gensler told the U.S. Chamber of Commerce Tuesday.  The new rules would also apply to exchanges and swap trading platforms.

The Dodd-Frank financial reform bill gives the CFTC 360 days to meet new rules for transparency, so the Commission has 30 teams drafting new regulations and working with the Securities and Exchange Commission and the Federal Reserve, Gensler said. The CFTC has also met personally with more than 100 market participants in the past two months and continues to be open to hearing industry input, he said.

Any financial entity using swaps will be required to trade them through a clearinghouse, Gensler continued. This includes swap dealers, hedge funds and insurance companies. “This will lower the risk of their swaps transactions and to reduce interconnectedness in the financial system.,” he said.

The estimated 200 or so swaps dealers, however, would not be required to register with the CFTC, but swaps participants would, he said.

“One of the great benefits that the Dodd-Frank Act brings to the American public, the Chamber’s members and ultimately your customers is transparency,” Gensler continued.  “The bill accomplishes this in two important ways: first, by requiring standardized swaps to trade on exchanges or swap execution facilities (SEFs) and second, through mandatory real-time reporting.”

By September 2011, the $615 trillion over-the-counter derivatives marketplace will be effectively transparent and reporting trades in real time, Gensler said.