Posts Tagged ‘Gary Gensler’

CFTC’s Progress on Wall Street Reform

Posted by Gary Gensler, Chairman of the Commodity Futures Trading Commission, on Monday March 4, 2013 at 9:25 am
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Editor’s Note: Gary Gensler is chairman of the Commodity Futures Trading Commission. This post is based on Chairman Gensler’s testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, available here.

The New Era of Swaps Market Reform

This hearing is occurring at an historic time in the markets. The CFTC now oversees the derivatives marketplace — across both futures and swaps. The marketplace is increasingly shifting to implementation of the common-sense rules of the road for the swaps market that Congress included in the Dodd-Frank Act.

For the first time, the public is benefiting from seeing the price and volume of each swap transaction. This post-trade transparency builds upon what has worked for decades in the futures and securities markets. The new swaps market information is available free of charge on a website, like a modern-day ticker tape.

For the first time, the public will benefit from the greater access to the markets and the risk reduction that comes with central clearing. Required clearing of interest rate and credit index swaps between financial entities begins next month.

For the first time, the public will benefit from specific oversight of swap dealers. As of today, 71 swap dealers are provisionally registered. They are subject to standards for sales practices, recordkeeping and business conduct to help lower risk to the economy and protect the public from fraud and manipulation. The full list of registered swap dealers is on the CFTC’s website, and we will update it as more entities register.

…continue reading: CFTC’s Progress on Wall Street Reform

The New Era of Swaps Market Reform

Posted by Gary Gensler, Chairman of the Commodity Futures Trading Commission, on Monday November 5, 2012 at 10:06 am
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Editor’s Note: Gary Gensler is chairman of the Commodity Futures Trading Commission. This post is based on Chairman Gensler’s remarks before the George Washington University Center for Law, Economics and Finance Conference, available here.

The days of the opaque swaps market are ending. On October 12, 2012, we are shifting to a new era of transparency and commonsense rules of the road for the swaps market.

New Era — Swaps Market Reform Becomes a Reality

During the Great Depression, President Roosevelt and Congress put in place similar rules to bring transparency to the securities and futures markets, and protect investors from fraud, manipulation and other abuses.

These critical reforms of the 1930s are at the foundation of our strong capital markets and many decades of economic growth.

Swaps emerged in the 1980s to provide producers and merchants a means to lock in the price of commodities, interest rates and currency rates. Our economy benefits from a well-functioning swaps market, as it’s essential that companies have the ability to manage their risks.

The swaps marketplace, however, has lacked the necessary transparency to best benefit Main Street businesses and common-sense rules to protect the public.

…continue reading: The New Era of Swaps Market Reform

How Global Benchmark Rates Failed and Can Recover

Posted by Gary Gensler, Chairman of the Commodity Futures Trading Commission, on Sunday October 14, 2012 at 9:25 am
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Editor’s Note: Gary Gensler is chairman of the Commodity Futures Trading Commission. This post is based on Chairman Gensler’s remarks before the European Parliament, Economic and Monetary Affairs Committee, available here.

In June, the financial markets were taken aback when the Barclays settlement was announced.

What were the systemic failures, how widespread is the problem, what action is being taken and what future reforms are necessary?

I will try to answer these questions.

How did it happen?

LIBOR is supposed to be the average rate at which the largest banks honestly believe they can borrow from one another unsecured, or without posting collateral. LIBOR was set up in the 1980s when banks regularly made loans to other banks on that basis.

There are at least three issues with LIBOR and other survey rates, such as Euribor, that I would like to discuss with you. The first and possibly the most significant issue with LIBOR is that the number of banks willing to lend to one another on an unsecured basis has been sharply reduced over the years.

…continue reading: How Global Benchmark Rates Failed and Can Recover

Cross-Border Application of Dodd-Frank Swaps Market Reforms

Posted by Gary Gensler, Chairman of the Commodity Futures Trading Commission, on Tuesday June 12, 2012 at 9:21 am
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Editor’s Note: Gary Gensler is chairman of the Commodity Futures Trading Commission. This post is based on Chairman Gensler’s remarks before the 2012 FINRA Annual Conference, available here.

I would like to focus my remarks on swaps market reform and specifically on how it fits into the international context.

International Swaps Market – Historically Unregulated

As you all know, with just the click of a mouse, risk can spread around the globe. We surely saw this as the financial system failed in 2008.

As the financial system failed in 2008, most of us learned that the insurance giant AIG had a subsidiary, AIG Financial Products, originally organized in the United States, but run out of London. The fast collapse of AIG, a mainstay of Wall Street, was again sobering evidence of the markets’ international interconnectedness. Sobering evidence, as well, of how transactions booked in London or anywhere around the globe can wreak havoc on the American public.

Swaps, now comprising a $700 trillion notional global market, were developed to help manage and lower risk for commercial companies. But they also concentrated and heightened risk in international financial institutions. And when financial entities fail, as they have and surely will again, swaps can contribute to quickly spreading risk across borders.

Leading up to the financial crisis, swaps were basically not regulated in Asia, Europe or the United States.

There were many reasons put forth as to why swaps should not be regulated. Let me touch upon just three of those reasons, as I believe they are relevant to today’s ongoing debates about the proper role of financial regulation.

…continue reading: Cross-Border Application of Dodd-Frank Swaps Market Reforms

Regulation of OTC Derivatives and the Proposed OTC Derivatives Markets Act

Posted by Gary Gensler, Chairman of the Commodity Futures Trading Commission, on Thursday October 22, 2009 at 9:01 am
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(Editor’s Note: The post below is a transcript of Mr. Gensler’s recent testimony to the House Committee on Financial Services, omitting introductory and conclusory comments. Mr. Gensler’s complete written testimony can be found here.)

I would like to address much-needed regulatory reform of OTC derivatives in the context of two principal goals: lowering risk to the American public and promoting transparency of the markets.

We embark upon this reform effort as the financial industry has become ever more concentrated. Given the events of the last decade, there are fewer providers of financial services today. There may be 15 to 20 large complex financial institutions that are at the center of today’s global derivatives marketplace. Five to ten years from now, it is quite possible that the financial system will become even more concentrated. With fewer actors on the stage, it is especially important that we lower the risk of these participants and bring sunshine to the activities in which they are involved.

One year ago, the financial system failed the American public. The financial regulatory system failed the American public. Exhibit A of these twin failures was the collapse of AIG. Every single taxpayer in this room – both the members of this Committee and the audience – put money into a company that most Americans had never even heard of. Approximately $180 billion of our tax dollars went into AIG – that is nearly $414 million per each of your Congressional districts. While a year has passed and the system appears to have stabilized, we cannot relent in our mission to vigorously address weaknesses and gaps in our regulatory structure.

Lowering Risk

To lower risk to the American public, the Administration proposed four essential components of reform.

First, those financial institutions that deal in derivatives should be required to have sufficient capital. Capital requirements reduce the risk that losses incurred by one particular dealer or the insolvency of one of its customers will threaten the financial stability of other institutions in the system. While many of these dealers, being financial institutions, are currently regulated for capital, I believe that we should explicitly – both in statute and by rule – require capital for their derivatives exposure. This is particularly important for nonbank dealers who are not currently regulated or subject to capital requirements.

…continue reading: Regulation of OTC Derivatives and the Proposed OTC Derivatives Markets Act

 
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