Wall Street won a delay in a controversial U.S. derivatives policy that extends the overseas reach of Dodd-Frank Act trading regulations.
The Commodity Futures Trading Commission (CFTC) will postpone enforcing a provision applying the rules to trades structured in the U.S. that banks then book in overseas affiliates, according to a notice posted on its website Friday. The agency granted the delay until as late as Sept. 30, 2015.
The policy, first devised in 2013, extended the agency's oversight and drew opposition from lobbying groups representing Goldman Sachs Group Inc., JPMorgan Chase & Co., and Deutsche Bank AG, as well as overseas regulators. The groups unsuccessfully sued the CFTC to try to overturn the regulation.
Timothy Massad, the agency's chairman, told traders in Chicago on Nov. 5 that he supported a delay to give regulators “the necessary time to consider” the issues.
“We should strive for rules that are clear and predictable—and that, as much as possible, do not create negative effects on competition,” Massad said at the Futures Industry Association conference.
The agency was empowered by Dodd-Frank to put in place new rules for the $700 trillion global swaps market after the products helped fuel the 2008 credit crisis. The regulations seek to have most swaps guaranteed at clearinghousees and traded on exchanges or other platforms that are designed to foster transparency in prices.
Massad's predecessor, Gary Gensler, argued that extending CFTC rules to trades in other jurisdictions was crucial to protecting the U.S. financial system from a foreign-born crisis. Swap-trading at a London unit of American International Group Inc. led to a U.S. bailout of the insurer during the crisis.
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