Swaps market legislation to clarify global reach of Dodd-Frank Act

By Sarah Gonzalez

© Copyright Agri-Pulse Communications, Inc.

WASHINGTON, March 28, 2012- Financial institution leaders supported legislation to clarify the reach of the Dodd-Frank Act today during the House Agriculture Subcommittee on General Farm Commodities and Risk hearing.

“This legislation will make it clear that Congress never intended for the CFTC to police the entire global swaps market," said Chairman K. Michael Conaway, R-Texas.

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The subcommittee reviewed three pieces of legislation regarding the Dodd-Frank Wall Street Reform and Consumer Protection Act during the hearing:

H.R. 3283, the Swap Jurisdiction Certainty Act would limit the extraterritorial scope of Title VII by providing a clear definition of U.S. person and non-U.S. person, and limit the application of Dodd-Frank to those activities that occur in the U.S, as Congress intended.

H.R. 1838 would modify Section 716 of the Dodd-Frank Act to ensure that the requirement for banks to "push out" certain swaps activities to separate affiliates does not increase risk to the system or drive up the costs of risk management tools for farmers and ranchers.

H.R. 4235, the Swap Data Repository & Clearinghouse Indemnification Correction Act of 2012 removes the indemnification provisions from sections 728 and 763 of the Dodd-Frank Act, and makes certain that U.S. and foreign regulators can share swaps data to increase market transparency and monitor for systemic risk. It is also referred to as The Swap Data Information Sharing Act.

The Swap Jurisdiction Certainty Act, H.R. 3283, would bring much-needed certainty to the question of the regulatory reach of Title VII of Dodd-Frank outside the U.S., said the Institute of International Bankers representative, Keith Bailey. He said H.R. 3283 would clarify Title VII by defining U.S. person and non-U.S. person and clarifies the reach of Dodd-Frank requirements on international transactions. 

“H.R. 3283 is an important step forward to defining what transactions and participants are subject to Dodd/Frank,” said Intercontinental Exchange, Inc. (ICE) Chief Operation Officer, Charles Vice before the Subcommittee.

“While the CFTC and SEC have issued dozens of proposed and final regulations implementing the Dodd-Frank Act, to date, neither agency has defined what activity has a direct and significant impact on the United States. In particular, many of the CFTC's final rules require ICE to come into compliance without ICE knowing whether our business is within the scope of Dodd/Frank,” Vice said.

The Depository Trust and Clearing Corporation Chief Operating Officer, Michael Bodson, told the Subcommittee that passage of the The Swap Data Information Sharing Act (H.R. 4235) is critical to prevent fragmentation of swaps data, “which could undermine the ability of regulators to obtain a comprehensive view of market data and frustrate market surveillance and oversight.”

“This bill would send a strong message to the international community that the United States is strongly committed to global data sharing and determined to avoid fragmenting the current global data set for OTC derivatives,” Bodson said.

All three pieces of legislation demonstrate clarifications to the Dodd-Frank Act without undermining the “spirit” of the law to bring reforms to Wall Street, said Rep. Bobby Scott (D-Va.). 


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