The Commodity and Futures Trading Commission (CFTC) announced on Friday that swap dealers would be granted a short-term delay on a new rule that mandates the counting of swaps as a component of registration.
The rule delay primarily affects Wall Street banks and energy traders, but it will also allow foreign entities to delay in tallying swaps until later this year. Additionally, swaps traded by companies transitioning to futures, like CME, the world’s largest futures exchange, will not count toward registration until early next year. When the extension ends, market participants will incur additional costs if swaps trades exceed an $8 billion threshold.
The delay came on Friday, the same day that the CFTC’s Gary Gensler announced “a new era of swaps market reform” meant to make the $650 trillion swaps market more transparent. The CFTC initiated the new reforms—tied to registration, transparency, and clearing—as a part of a mandate stemming from the Dodd-Frank Act.
Confusion and Controversy Surrounding CFTC
The new rules have been the subject of controversy and presidential debate politics over the last few weeks. Republicans have accused the CFTC of ideological maneuvering and wastefulness as they pursue controversial position-limits rules in court
There’s a fair amount of confusion,” said Andrew Lebow, a vice president at Jefferies Bache LLC. . In general “I don’t know how ready the industry is” to comply with the new rules, he added.
One CFTC commissioner, Republican Scott O’Malia publicly aired grievances about the last-minute approach of his agency. “While this is a step in the right direction, the commission should never have gotten to the point where it was forced to issue such last-minute piecemeal relief,” O’Malia said.
The CFTC did not grant relief to all securitization entities. Those used to collateralize debt and loan obligations, for example, were not granted exemption.