Regulatory future uncertain despite some progress on Dodd-Frank rules in 2012

Scott O’Malia

Scott O’Malia

Despite a regulatory whirlwind in 2012, financial industry participants remain uncertain about the future of Dodd-Frank rules, as well as their future impact on the industry.

Earlier in 2012, the CFTC finalized rules requiring “major swap dealers” and “major swap participants” to register with the agency. The CFTC, however, issued 18 relief documents on the day the rule was slated to take effect in order to delay the compliance deadline, Futures & Options World reports.

As a result of the new rules governing the swaps industry, some firms have chosen to leave the market altogether.

“It was surely not the commission’s intention to draft rules that would send market participants fleeing from the swaps market,” CFTC Commissioner Scott O’Malia said, according to Futures & Options World. “The commission has created such a regulatory nightmare that the energy markets have sought cover in the relative safe haven of the futures markets.”

Mandatory trade reporting has also already begun in the U.S., but European industry participants remain concerned about whether firms will be able to implement systems in time to meet the compliance deadline.

Additionally, over-the-counter derivatives clearing regulation has been the most closely monitored regulatory change. Both U.S. and European regulators have delayed the rules, Futures & Options World reports.

While European regulators are still struggling to finalize central clearing requirements, the CFTC approved swap classes in 2012 that will be required to clear on Nov. 28. Publication of clearing rules in the U.S. means that industry participants will have to solve the “collateral squeeze” that is expected as result of the OTC clearing rules.

Little progress has been made, however, regarding the cross-border applications of regulation. The CFTC proposed its guidance on cross-border application of Dodd-Frank rules in July, leading many market participants overseas to voice concern regarding the scope of the CFTC’s authority, according to Futures & Options World.

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