Industry officials last Wednesday accused the Commodity Futures Trading Commission (CFTC) of rushing the rulemaking process under the Dodd-FrankWall Street Reform Act, and said the proposed rules issued so far are too prescriptive.
“It’s in the best interests of the market to allow as much a grace period as possible to make sure regulations are done right and don’t have unintended consequences,” Greg Mocek, partner with Cadwalader, Wickersham & Taft and former director of enforcement at the CFTC, said at GasMart 2011 in Chicago.
“I think what is currently proposed by Congress [extending Dodd-Frank implementation until end of 2012] would be a good timeframe,” he told NGI.
While CFTC has indicated that it wants to have the final rules out by year-end, “I think it will be the end of 2012 before the thing is truly operating,”said Paul Cusenza, CEO of Nodal Exchange LLC. He sees implementation being delayed until the end of 2012 even without legislation being passed to extend the current July 15 deadline for completing the rules.
HR 1573, which would postpone implementation of Dodd-Frank until the end of 2012, was approved by the House Agriculture Committee earlier this month, and the House Financial Services Committee is expected to take up the bill on May 24.
Testifying before a Senate Appropriations subcommittee earlier this month, CFTC Chairman Gary Gensler said a “delay…would put the American public at risk of markets that are still dark by and large” and unregulated (see NGI, May 9). Gensler said he doubted that many people would benefit from postponing implementation of Dodd-Frank, with the exception of some in the financial community, which “rationally would like a darker market.”
While the CFTC likes to think of itself as a principles-based regulator, its Dodd-Frank proposed rules were criticized for being prescriptive. “You’re in an environment where there are prescriptive rules and regulations on everything you do,” Mocek said.
CFTC’s proposed rules “are totally overly prescriptive,” said Jerry Putnam, CEO of TruMarx Data Partners. The proposed rules will result in “harmful consequences” in the market, and “those unintended consequences are going to be enormous,” he noted.
Putnam believes that many of the rules are in conflict, and “at some point there will have to be changes” made.
“There is no doubt…a fair number of prescriptive regulations in Dodd-Frank,” Mocek said. “The regulatory environment has gone through a sea change as a result of Dodd-Frank, and you’ll see a fair amount of costs imposed upon everyone operating” in the multi-trillion dollar swaps market, he said.
“I think that some of the rules are in fact more prescriptive than what the Dodd-Frank Act prescribed,” Cusenza said. One example is the proposed rule related to the price discovery function, he said.
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