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Comment: Another Failure to Regulate Derivatives

By The Editorial Board
Published July 2, 2014 New York Times

By the time the Securities and Exchange Commission finalized a rule last month to regulate derivatives under the Dodd-Frank financial reform law, the big banks that dominate the multitrillion-dollar market had already figured out how to game it.

This is not a tale, however, of how wily banks always find a way around the rules. In this case, the S.E.C. has written and passed a rule that is custom built for evasion, all the while insisting, unconvincingly, that it does not have the legal authority to be any tougher.

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U.S. SEC Votes to Adopt Part of its Swaps Cross-Border Rule

By Sarah N. Lynch
Published June 25, 2014 Reuters UK

The U.S. Securities and Exchange Commission voted on Wednesday to adopt the first of a series of crucial rules that lay out when foreign banks that deal in derivatives must comply with U.S. regulations.

SEC commissioners said the final rule, which is required by the 2010 Dodd-Frank Wall Street reform law, contains some tougher measures than previously proposed to close some potential loopholes that could have permitted foreign banks to circumvent U.S. regulations.

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Extent of U.S. Swaps Clampdown Overseas to Get SEC Vote

By Dave Michaels and Silla Brush
Published June 25, 2014 Bloomberg

The Securities and Exchange Commission plans to vote today on a plan that will define how far its regulations reach into a segment of the $710 trillion global swaps market.

The SEC’s rule will outline how new requirements apply to derivatives traded by foreign divisions of U.S. banks including JPMorgan Chase & Co. (JPM:US) and Goldman Sachs Group Inc. (GS:US) The new rule comes as Wall Street takes steps to restructure trades overseas to avoid Dodd-Frank Act regulations intended to increase competition and price transparency.

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Senate, House Unveil Dueling Budget Plans for SEC, CFTC

By Sarah N. Lynch
Published June 24, 2014 Reuters

The U.S. Senate and House of Representatives have released dueling fiscal 2015 budget proposals for the country's top two financial market regulators, with Democrats seeking more funding and Republicans urging more belt-tightening and limits on how money is spent.

The two opposing spending bills mark the latest partisan dispute over how much money to allocate for the Securities and Exchange Commission and the Commodity Futures Trading Commission.

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House GOP Cuts IRS, SEC Funding

By David Rogers
Published June 17, 2014 Politico

House Republicans rolled out a $21.3 billion financial services bill Tuesday that cuts more than $2 billion from President Barack Obama’s budget requests — chiefly at the expense of the Internal Revenue Service and Securities and Exchange Commission.

The IRS is promised $10.9 billion, about $341 million below current funding and $1.5 billion less than what Obama has asked for in the new fiscal year that begins Oct. 1. The SEC is essentially frozen in place at $1.4 billion, $300 million below the president’s request.

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SEC Silence on Swap Spread Sef Trading Frustrates Market

By Peter Madigan
Published June 17, 2014 Risk

New trading requirements for certain swap packages came into force yesterday with market participants still in the dark as to whether the US Securities and Exchange Commission (SEC) is comfortable with a ruling from the Commodity Futures Trading Commission (CFTC) that appears to trample over its fellow regulator's turf.

Swap spread trades had been temporarily exempted from the need to use a swap execution facility (Sef), because they combine over-the-counter swaps – which are regulated by the CFTC and have to trade on a Sef – with trades in the US Treasury bond market, which is regulated by the SEC and is not subject to a Sef-trading requirement. CFTC relief expired on June 15, but the SEC has refused to say where it stands on the issue.

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US SEC’s Lack of Progress on Reform Rules Frustrates Officials

By Gina Chon
Published May 27, 2014 Financial Times

The pace of passing major financial reform rules has slowed to a crawl at the US Securities and Exchange Commission, frustrating some officials at the SEC and at other regulatory agencies who are upset by the lack of activity, according to people with direct knowledge of the matter.

While the SEC has issued numerous enforcement actions this year, the agency has made little progress on more than 40 rules on its 2014 agenda. Most of those rules stem from the 2010 Dodd-Frank financial reform legislation passed in reaction to the 2008 financial crisis, and the Jobs act, which makes it easier for smaller start-ups to go public.

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Swap Packages Raise Dual Oversight Fears

By Mike Kentz
Published May 24, 2014 IFR

Some of the most widely traded swaps transactions in the market are set to be pushed on to swap execution facilities on June 16, creating a potential compliance headache as market participants face the prospect of bowing to two separate regulators on a single transaction.

The multi-legged deals involve the pairing of an interest rate swap and a Treasury contract into a single trade. Traders estimate that 90% of the dealer-to-dealer interest rate swap market and 60% of dealer-to-client trades are transacted as swap spread packages, as they are known.

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US Congressional Committee Blasts Sifi Designation Process

By Louie Wodall
Published May 19, 2014 Risk

US insurance regulators and lawmakers are demanding to know more about how the Financial Stability Board (FSB) designates non-bank globally systemically important financial institutions (G-Sifis) amid concerns that FSB decisions are influencing the designation process for US systemically important financial institutions (Sifis).

The US House of Representatives Committee on Financial Services sent a letter on May 9 to secretary Jacob Lew of the US Treasury; Janet Yellen, chair of the Federal Reserve; and Mary Jo White, chair of the US Securities and Exchange Committee (SEC), requesting they disclose by May 16 every communication in their possession relating to the designation and methodologies used to designate and regulate G-Sifis.

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Modernizing our Regulatory Structure

By Richard H. Neiman and Mark Olson
Published April 14, 2014 The Hill's Congress Blog

Streamlining America’s financial regulatory architecture was a major missed opportunity in the Dodd-Frank Act. Our existing structure is a patchwork of reactions to past financial crises that date back more than 150 years. Modernizing this patchwork system would improve regulation, enhance financial stability and increase economic growth. Today, we propose a road map for how to achieve these goals.

Each major U.S. financial regulator was created following a crisis. The need for Civil War funding birthed the Office of the Comptroller of the Currency (OCC). The Panic of 1907 brought about the creation of the Federal Reserve. The Great Depression resulted in the Federal Deposit Insurance Corporation and the Securities and Exchange Commission (SEC).

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