Ex-CFTC Boss Lukken: Rep Frank's Bill Can Revive OTC Reform
07 Outubro 2009 - 3:05PM
Dow Jones News
The former head of the U.S. futures market regulator said
Wednesday that a draft bill proposed by Rep. Barney Frank (D-Mass.)
represents a chance to revive "stalled" efforts to tighten
oversight of off-exchange trading activity.
Walter Lukken, the former acting chairman of the Commodity
Futures Trading Commission who now serves as a senior vice
president for exchange operator NYSE Euronext (NYX), said he was
hopeful the bill would pass in the coming weeks.
In remarks before a Chicago conference on corporate
responsibility, Lukken credited Treasury Secretary Timothy Geithner
for his department's proposal earlier this year to bring
over-the-counter derivatives trade onto exchange platforms, but
"unfortunately, that idea has stalled."
"But it's not too late to jump-start the idea," Lukken said,
referring to the proposal from House Financial Services Chairman
Frank.
The draft bill, circulated Friday, incorporates most elements of
the Obama administration proposal, like requiring dealer banks and
other major market participants to route standardized
over-the-counter contracts through clearinghouses, which guarantee
trades.
However, Frank's bill differs from the Treasury proposal in that
it wouldn't mandate exchange trading of over-the-counter
derivatives and would let many more companies qualify for
exemptions from clearing requirements.
The proposal has met resistance this week from current CFTC
Chairman Gary Gensler, who on Wednesday warned that it could let
too many companies avoid clearing their swap transactions.
Henry Hu, head of the Securities and Exchange Commission's newly
created division of risk, strategy and financial innovation,
cautioned Wednesday that the SEC's anti-fraud capability could be
weakened by Frank's bill. Hu also saw issues with dividing OTC
oversight between the SEC and CFTC.
Frank said Wednesday that the bill remains a "work in progress"
and that he hopes for a U.S. House vote in November.
Exchange companies like NYSE Euronext have been generally
supportive of U.S. efforts to require more oversight of
over-the-counter markets, and Lukken on Wednesday hailed the Obama
administration's push to "bring large segments of the financial
world out of darkness and into the sunshine."
Exchange leaders also see the shift of over-the-counter
derivatives to centrally cleared platforms as a chance to expand
their business, and are competing to set up facilities to handle
products like credit default swaps, interest rate swaps and other
customized financial instruments.
NYSE Euronext this summer shuttered a failed attempt to clear
credit derivatives via a London-based facility, but may pursue the
much-larger interest rate swaps market via a new clearinghouse the
company is building with the Depository Trust and Clearing
Corp.
Lukken said Wednesday that despite U.S. regulators' efforts in
recent months to tighten oversight of financial markets, "the
existing financial regulatory structure is rife with gaps," and
still lacks a body to oversee systemic risk issues.
"This crisis has created a once-in-a-generation opportunity to
modernize our outdated regulatory structure, and we must not let
this opportunity pass," he said.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com