By Alexandra Alper
WASHINGTON, Sept 21 (Reuters) – A top regulator at the U.S.
Commodity Futures Trading Commission called o n F riday for the
agency quickly to finalize rules aimed at preventing conflicts
of interest at derivatives exchanges and clearing-houses.
In remarks prepared for delivery at the Hard Assets
Investment Conference in Chicago, Democratic Commissioner Bart
Chilton urged the CFTC to take up two-year old proposals that
would limit the voting equity in clearing-houses and exchanges
that members like banks can hold.
“The time has come, and we need to get a final rule out
there that does what I’ve been talking about: make sure that
banks don’t put their own interests in front of their
customers,” Chilton said.
“It’s my hope and expectation that our agency will get a
final rule out by the end of this year.”
The rules were mandated by the 2010 Dodd-Frank Act, aimed at
beefing up oversight and limiting risk in the $648 trillion
global over-the-counter swaps market, among other financial
reforms.
The law was a response to the financial crisis, which was
fueled by risky swaps trading at firms like insurer American
International Group that led to multi-billion dollar
taxpayer bailouts.
The conflict-of-interest rules were among the first proposed
by the agency in October 2010, but contentious debate has
prevented the proposal from being finalized.
Opponents believe the curbs would stall investment in
trading and clearing platforms at the very time an expansion is
needed to handle an influx of contracts and improve stability
and transparency in the sector.
But supporters say the limits are needed to prevent large
players from exercising too much power over the mechanics of the
vast market. Some, including the Department of Justice, have
asked for tougher rules.
“I might have proposed some stricter standards, if it were
just me,” Chilton said.
The agency, which has struggled to keep pace with the dozens
of rule-making deadlines, has been criticized for its ad-hoc
approach to finalizing rules.
Among the key components of the proposals is a measure
capping voting equity at 20 percent for members of exchange and
swap trading platforms, known as “swap execution facilities,” or
SEFs.
Another component would require at least 35 percent of
boards at clearing-houses, exchanges and SEFS to be public
directors. Such directors would also have to make up a majority
of nominating committees.
Such rules are key to shifting the corrosive culture that
Chilton says has come to dominate many banks.
