In testimony before the Senate Banking Committee today, Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler laid out some objectives for the regulation of over the counter derivatives, including modification of the Commodity Exchange Act (CEA). OTC derivatives are still a hot topic in the industry, especially after President Obama’s regulatory reform proposal last week called for both the Securities and Exchange Commission (SEC) and CFTC to have a hand in regulating them.

Gensler called for a “comprehensive regulatory framework” governing OTC derivatives and markets, wherein two regulatory regimes, one focused on the dealers and one focused on the markets, would be implemented, and called for Congress to impose capital requirements for all dealers. He also said the CFTC should have the ability to impose position limits on OTC products that “perform or have a significant price discovery function.” His proposed amendments to the CEA would give the CFTC and SEC clear authority to regulate OTC products and clearly define the term “OTC derivative,” leaving no room for duplication in regulation.

As we notedthough, the last time the two agencies were given dual regulatory authority over a product (single stock futures), it didn’t work out so well, with many blaming flagging growth for SSFs in the United States on the regulatory overlap. And some industry insiders don’t like the Obama proposal as a whole, calling it “more of the same.”

Tags: CFTC, Gary Gensler, OTC, regulation, SEC

This entry was posted on Monday, June 22nd, 2009 at 2:19 pm and is filed under Regulatory/actions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.