Subcommittee Reviews Impact of Capital and Margin Requirements on End-Users
Today, the House Agriculture Committee’s Subcommittee on Commodity Exchanges, Energy, and Credit held a public hearing to review the impact of the Dodd-Frank Act on derivatives markets and participants. Members of the subcommittee examined the unintended consequences of some of the most important regulations following the financial crisis: the new capital standards and margin requirements for banks, non-bank swap dealers, and other market participants.
“Main street businesses that rely on derivatives markets to manage their risks will be deeply impacted by the decisions made by regulators designing these rules. While Congress has been clear in its efforts to exempt these end-users from much of the regulatory burdens associated with Dodd-Frank, these rules could have impacts on end-users if they drive intermediaries, like Futures Commission Merchants and Swap Dealers, from the markets. If this happens, hedgers would see their spreads widen, their fees increase, and liquidity fall,” said Subcommittee Chairman Austin Scott (R-GA).
“Regulators must be mindful that any new rules do not inadvertently increase market participants’ business costs and constrain liquidity in the marketplace. While the rules may be aimed more towards financial institutions, the smaller end-users like farmers, ranchers, and small businesses rely on these intermediaries to manage their risks,” said Agriculture Committee Chairman K. Michael Conaway (R-TX).
Written testimony provided by the witnesses from today’s hearing is linked below. Click here for more information, including Subcommittee Chairman Austin Scott's opening statement and the archived webcast.Witness List:
The Honorable Walter Lukken, President and Chief Executive Officer, Futures Industry Association, Washington, DC
The Honorable Scott O'Malia, CEO, International Swaps and Derivatives Association, Inc., New York, NY
Mr. Thomas C. Deas, Jr., Chairman, Representative, of the Center for Capital Markets Competitiveness and Coalition for Derivatives End-Users
Mr. Tyler Gellasch, Founder, Myrtle Makena, LLC, Homestead, PA