DerivAlert Blog

Industry Leaders Comment on OTC Derivatives Regulation at the SIFMA Regulatory Reform Summit

Yesterday, as U.S. Senators prepared to cast their final vote on the Restoring American Financial Stability Act of 2010, industry members gathered to discuss what the pending regulatory changes will mean to the OTC derivatives market at the Regulatory Reform Summit held at the Marriott Marquis in New York City, hosted by the Securities Industry and Financial Markets Association (SIFMA).

Speakers including Robert Cook, Director of the Division of Trading and Markets of the U.S. Securities and Exchange Commission (SEC); Gary Gensler, Chairman of the U.S. Commodity Futures Trading Commission (CFTC); and Neal Wolin,Deputy Secretary of theU.S. Department of the Treasury, talked about the day’s Senate vote and how the new regulation will affect the industry.

Gensler, who spoke in the morning, said, “The bill requires strong regulation of over-the-counter derivatives dealers for the first time. This includes both bank dealers on Wall Street and nonbank dealers, such as the next AIG. Dealers will be subject to capital and margin requirements for their derivatives books to lower risk. …This will promote market integrity by protecting against fraud, manipulation and other abuses. Business conduct standards also lower risk through uniform back office standards for netting, processing and documentation. Dealers will for the first time be required to meet recordkeeping and reporting requirements so that regulators can police the markets.” 

Read Genler’s complete comments from the SIFMA Regulatory Reform Summit here.

Wolin, who spoke after the results came back from the Senate’s cloture vote, said, “First, this bill makes it possible to identify and manage systemic risk in a way that we could not do before. … This legislation gives us the tools, for the first time, to look beyond the safety of individual firms or markets to the health of the broader financial system.  Second, this legislation requires that regulators impose substantially stronger prudential standards. Robust, risk-based capital, leverage, and liquidity standards will provide a more reliable buffer against both firm-specific failures and systemic shocks.  And prudential requirements will be higher for the largest, most interconnected firms – requiring them to internalize the risks they impose on the system by virtue of their size and complexity.”

Read Wolin’s complete comments from the SIFMA Regulatory Reform Summit here.