Rising prices for basic commodities -- including both agricultural and energy markets -- underscore the need for greater oversight of the $600 trillion derivatives market, said the head of the Commodity Futures Trading Commission (CFTC).
"Though the CFTC is not a price-setting agency, we have a number of tools to help ensure market integrity and protect against fraud and manipulation. This includes position limits, antimanipulation authorities, large trader reporting and pre-trade risk safeguards," he said in a speech to the European Parliament's Economic and Monetary Affairs Committee Tuesday.
"We have authorities to pursue both manipulation and attempted manipulation. I understand you are taking that up in the Market Abuse Directive. We strongly support providing regulators the power to deter and prosecute attempts to manipulate the market," Gensler said.
U.S. and European regulators have been coordinating their efforts to regulate the heretofore unregulated derivatives market since the 2008 financial crisis, where swaps "played a central role," he noted. President Obama last July signed into law the sweeping Dodd-Frank Wall Street Reform Act, which required the CFTC and the Securities and Exchange Commission to issue rules implementing financial reforms (see Daily GPI, July 22, 2010).
"As we work to bring oversight to the swaps market, the CFTC is consulting heavily with counterparts in Europe and elsewhere to harmonize our approach to swaps oversight," Gensler said.
"We must continue to work together to bring oversight to the swaps market to help reduce the chance of the next crisis. Effective reform cannot be accomplished by one nation alone," Gensler said. "With the significant majority of the worldwide swaps market located in the U.S. and Europe, the effectiveness of reform depends on our ability to cooperate and find general consensus on this much-needed regulation."
The CFTC "will begin considering final rules only after staff can analyze comments, after the Commissioners are able to provide feedback to staff, and after the Commission can receive feedback from fellow regulators both in the U.S. and abroad," he said.
"Congress gave the CFTC flexibility as to setting implementation or effective dates of the rules to implement the Dodd-Frank Act. For example, even if we finish finalizing rules in a particular order, that doesn't mean that the rules will be required to become effective in that order. Implementation dates may be conditioned upon other rules being finalized.
"Furthermore we are looking at phasing implementation dates based upon a number of considerations, possibly including asset class, type of market participant and whether the requirement would apply to market platforms, like clearinghouses or to specific transactions, such as real-time reporting...We look forward to hearing from market participants and regulators, both in the U.S. and abroad, regarding the phasing of implementation," Gensler said.
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