CFTC Chair Gensler calls for strong derivatives rules in financial reform bill

CFTC Chair Gensler calls for strong derivatives rules in financial reform bill

By Jon Harsch

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Washington, June 23 - With the House-Senate conference committee due to take up contentious derivatives provisions in the Wall Street reform bill Thursday, Commodity Futures Trading Commission (CFTC) Chair Gary Gensler is calling for maintaining tough new rules in the Wall Street Transparency and Accountability Act of 2010.

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Commenting on the new rules which Senate Agriculture Committee Chair Blanche Lincoln (D-AR) insists on and the White House and major banking interests would like softened, Gensler said that “The bill includes historic provisions to bring comprehensive regulation to over-the-counter derivatives. This includes fully regulating derivatives dealers and requiring standardized derivatives to be traded on transparent trading facilities and be cleared by central counterparties.”

Republicans on the conference committee continue to predict that regulatory “overreach” would drive lucrative derivatives trading to less regulated markets overseas, would drive up trading costs, and would limit the ability of many end users to hedge their business risks. Well aware of such concerns, Gensler insists that “To best protect the American public, I am hopeful that the final bill does not include exemptions from clearing and trading for financial entities that use derivatives. While it is clear that the bill will include exemptions for commercial end-users of derivatives, that exemption should be narrow and well-defined. Exemptions for financial entities leave interconnectedness in the system and create links in the chain between a dealer's failure and a taxpayer bailout.”

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