Mon, Jul 6, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Inside and outside the CFTC concerns are raised over new swaps regulation

Thursday, July 07, 2011

John Damgara
Opalesque Industry Update –Futures Industry Association (FIA) President John Damgara released a statement following the CFTC approval of extensive changes in rules prohibiting fraud and manipulation in futures, swaps and cash commodity markets, and the FIA is clearly unsatisfied with the new regulation.

“"We are disappointed that the final rules do not reflect the extensive comments submitted to the CFTC by the FIA and other interested parties, and we are concerned that the CFTC did not provide more guidance on how it intends to apply the sweeping new powers that these rules will implement. We strongly support the CFTC's authority to pursue any and all deliberate attempts to manipulate prices or defraud participants in these markets, but the lack of clarity on how the broad new standards in the final rules will be applied has the potential to chill legitimate trading and reduce market liquidity."

On Thursday the CFTC voted through nearly 50 rules that would fall under Dodd Frank Regulation requirements. One of the most significant rules (according to Gary Gensler, CFTC Chairman) is the new requirement that they agency would only require one standard of proof that a trader acted recklessly, and it would allow the CFTC the ability to prosecute fraud-based manipulation. This particular rule is expected to have a great impact because prior to this the agency brought few cases against manipulators and won only a single won (after a decade long fight). Source).

Scott O’Malia, CFTC Commissioner spoke at the opening of the public hearing and requested that further transparency be adopted in adopting regulations. O’Malia noted that he has requested final regulation verbiage be posted on the CFTC website a full 7 days before proceedings, but has not heard whether or not that practice will be adopted. He also noted that while the ruling for stronger manipulation regulation would see the agency focused on pursuing such cases, O’Malia noted that without transparency through on all rules and changes, the duty (of sorting out who was confused by rules to who is flagrantly breaking them) would fall upon the shoulders of the enforcement staff.

“Briefly stated, the problem is: how can the Commission move forward on a final regulation implicating “swap dealers,” when the Commission has not determined if the term captures end-users? I recognize that the Commission will obtain the lion’s share of data from financial swap dealers. My concern is with those end-users that may be characterized as non-financial swap dealers. Even though the Commission is voting on Large Trader Reporting today, the Commission cannot determine the full benefits and costs of this regulation until the Commission defines “swap dealer” and “swap.” As I have stated previously, end-users did not cause the 2008 financial crisis. Every dollar of cost that the Commission imposes on end-users may translate into increases in energy or food costs or squeeze farmers and other industrial producers who are unable to pass on these increased costs,” said O’Malia. (Full statement available: Source)

Kirsten Bischoff

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: New systematic strategy managed alongside research firm outperforms S&P500[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: An emerging CTA manager explains how he runs his strategy, which is based on an index produced by a research firm. Peter Turk is head of

  2. Opalesque Exclusive: New systematic strategy embraces machine learning[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: The founder of a New York-based systematic trading firm, which offers a hybrid between alpha strategies and alternative feta at lower fees, describes his approa

  3. Larry Robbins' hedge fund Glenview buys 1m Tenet Healthcare shares[more]

    Komfie Manalo, Opalesque Asia: Glenview Capital Management said it bought an additional 979,482 shares at Tenet Healthcare Corp valued at $53.80 million, raising its stakes in the healthcare services company to 15.16%, reported

  4. Legal - Grayson’s hedge funds under scrutiny for possible ethics violations, Court rejects hedge fund’s motion to block merger of Samsung affiliates[more]

    Grayson’s hedge funds under scrutiny for possible ethics violations From Freebeacon.com: Rep. Alan Grayson is finding himself in hot water over managing hedge funds that bear his name, actions that are in possible violation of House ethics rules. Sitting members of Congress are prohibite

  5. Hedge funds decline in June as stocks tumble on Greek woes[more]

    From Bloomberg.com: Hedge funds posted losses across strategies last month as uncertainty over whether Greece will remain in the euro sent global stock markets tumbling. Winton Capital Management declined about 3.1 percent in June in its $12.1 billion Winton Futures Fund, leaving it down 1.9 percent

 

banner