Sommers Criticizes CFTC’s Approach to Dodd-Frank Rule Implementation

Outgoing CFTC commissioner Jill Sommers has publicly expressed frustration at the CFTC’s imposed provisions on derivatives market participants, as reported in an exclusive interview with Energy Risk. Sommers is responding to the complex Dodd-Frank stipulations demanded of derivatives market participants.

In a quote by Energy Risk, Sommers stated: “Everybody is scared to death that if they’re not in compliance, then we’re going to file an enforcement action.”

Last-Minute Regulatory Relief

Sommers has expressed dissatisfaction at the volume of last-minute regulatory relief the CFTC needed to issue during their transition to a new regulatory structure. Critical provisions on swaps and swap dealers went into effect on October 12, 2012, before the CFTC was able to respond to many industry petitions about the new rules. Other crucial rules on swap reporting began on January 1, 2013, in addition to more than 50 no-action letters granting temporary relief from individual rules – despite industry complaints about a lack of clarity. In her interview with Energy Risk, Sommers says, “We have spent the past six months basically writing no-action letters and listening to market participants tell us they’re not ready,” she says. Sommers also indicated in her interview with Energy Risk, that the CFTC should not have required any firm to be in compliance until the Dodd-Frank rule-making process was complete.

CFTC to Finalize Rules

Currently, several important rules need to be agreed upon, including: swap execution facilities (SEFs), margin requirements for uncleared swaps, and capital requirements for swap dealers. Sommers, who has served on the CFTC since 2007 and was in the midst of her second term, announced her intention to resign on January 24.

According to Risk, until the Senate confirms a replacement, many commentators speculate that her departure will reinforce CFTC chairman Gary Gensler’s actions. Energy Risk reports that Sommers intends to participate in the final vote on SEF rules, a major component of CFTC’s upcoming implementation period.

The Dodd-Frank Act has required the CFTC to write thousands of pages of rules in recent years. According to Sommers, as reported by Risk, “Our workload has increased exponentially,” she says. “I’m just ready to move on to a new challenge and hopefully something that’s not quite as demanding.”

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