The U.S. Commodity Futures Trading Commission and European regulators today announced they have agreed to ease restrictions on access to the type of electronic trading venues where overseas affiliates of U.S. firms can continue trading SWAPs, The Wall Street Journal is reporting.
Such a move is viewed as a benefit to those trading SWAPs because it will make it easier for them to circumvent tougher U.S. SWAPs rules.
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If “comparable” rules exist, overseas trading permitted
Although exact details of the rules are not clear, the new rules will allow U.S. firms to trade on European platforms so long as those trading venues are governed by “comparable” rules to those under the 2010 Dodd-Frank law. “Comparable” being the operable word, as sometimes subtle changes in regulation can result in important differences in regards to transparency on key components and leverage usage.
Gensler aggressively fought against overseas SWAPs trading
Former CFTC Chairman Gary Gensler had aggressively championed strong U.S. regulations oversee SWAP transactions of U.S. firms, a move said to have alienated him from financial insiders among the Obama Administration.
In a July 3 meeting in the White House, “Gensler had argued his plan was vital if the U.S. hoped to seize meaningful authority over financial instruments that helped push the global economy to the brink in 2008, taking down American International Group Inc (NYSE:AIG) and Lehman Brothers Holdings Inc Plan Trust (OTCMKTS:LEHMQ) and igniting the worst recession since the 1930s,” according to a Bloomberg report. The report said U.S. Treasury Secretary Jacob Lew insisted that Gensler “coordinate better” with the Securities and Exchange Commission, which was interpreted by some as an order for Gensler to succumb to the prevailing lighter regulatory touch said to have been advocated by then newly confirmed SEC Chairwoman Mary Jo White, who was also present in the meeting. “Gensler, who was deep into negotiations with his European counterparts, was surprised by Lew’s demand,” the report said. “He’d been hearing the same request from lobbyists seeking to slow the process, and he told the Treasury chief it felt like his adversary bankers were in the room,” the report said, quoting people in the meeting.
Gensler had said he put up such stiff resistance to the overseas trading permissions because he feared a repeat of the 2008 financial crisis, when several firms had executed over the counter trades overseas.