CFTC proposal waives indemnification provisions, allow regulators greater data access

The Commodity Futures Trading Commission unveiled a proposal on Tuesday that would address concerns about certain provisions of the Dodd-Frank Act that could ultimately reduce overseas regulators’ access to swaps data.

Indemnification agreements mandated by Dodd-Frank require foreign regulators to assume lawsuit-cost liability for any breaches of confidentiality before U.S. regulatory agencies will agree to share information, NASDAQ reports.

The new CFTC proposal, however, “generally exempts foreign regulators” from the indemnification agreements so that they continue to have uninterrupted, timely access to data.

Industry officials, lawmakers and regulators continue to dispute whether the agency can correct the problem or if a legislative fix is needed. During a March House Financial Services hearing, the Securities and Exchange Commission told the panel that lawmakers should get rid of part of the Dodd-Frank law, according to NASDAQ.

“Regulators, including U.S. regulators, would be challenged in carrying out their responsibility” to regulate and oversee the markets, SEC Director of International Affairs Ethiopis Tafara said, NASDAQ reports.

Tafara shared concerns with the panel that the indemnification requirement could interrupt information sharing among regulators and make it more difficult for U.S. regulatory agencies to get a comprehensive look at the overseas derivatives markets.

The CFTC and SEC are currently writing rules that would establish new regulatory framework for enhanced oversight of derivatives markets. The Deposit Trust and Clearing Corp., a derivatives, bonds and stocks data repository, said that a legislative fix is necessary to correct the problem.

“DTCC maintains the belief that a legislative ‘technical correction’ is the only viable solution to avoid the unintended negative consequences of the Indemnification Provisions,” the agency said in an April letter to the CFTC, according to NASDAQ.

Once published in the federal register, the CFTC proposal will be open for 30 days for public comment. The proposal would then undergo a final vote by CFTC commissioners before taking effect.

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