Lucas: Surprise CFTC Action on Cross-Border Swaps is Irresponsible
Tamara Hinton, 202.225.0184
WASHINGTON – Rep. Frank Lucas, Chairman of the House Agriculture Committee, today issued a statement in response to the Commodity Futures Trading Commission's (CFTC) surprise "advisory notice" to further regulate cross-border swaps.
"Putting aside legal questions surrounding the CFTC’s latest move to regulate cross-border swaps, my immediate concern is that this action has created confusion and is disrupting the U.S. swaps markets. Regulations market participants thought were in place changed overnight without warning or consultation. The CFTC needs to immediately issue a public statement explaining to market participants when it will enforce its ‘advisory notice.’ Regulating without regard for how markets function is irresponsible, harms our credibility with the international business community, and will ultimately force American jobs and markets overseas," said Chairman Frank Lucas.
On December 13, 2012, the Agriculture Subcommittee on General Farm Commodities and Risk Management held a hearing on the issue of cross-border swaps regulation and heard from top international regulators from Japan and the European Union, in addition to CFTC Commissioners. The takeaway from the hearing was cross-border swaps regulation must be done in a careful and coordinated way or business will be disrupted and markets will regionalize. Patrick Pearson with the European Commission said that if regulatory conflicts between the United States and 27 member nations of the European Union are not resolved it will create a "fragmented market and a significant concentration of financial risk in the U.S. system, and this is exactly what we tried to prevent with our global regulatory reform."
On March 14, 2013, the Agriculture Committee held a hearing to examine legislation (H.R. 1256, the Swaps Jurisdiction Certainty Act) requiring coordination between the CFTC and the Securities and Exchange Commission (SEC) when regulating cross-border swaps. The Committee heard testimony from CFTC Chairman Gary Gensler and various market participants. At the time, Chairman Gensler promised that the CFTC would "continue to work...very closely with the international community. We will not be exactly the same, but where there are conflicts, we are taking a very pragmatic approach."
On March 20, 2013, the Agriculture Committee approved H.R. 1256, the Swaps Jurisdiction Certainty Act, by unanimous voice vote. The legislation required the CFTC and SEC to coordinate and issue a joint rule regulating cross-border swaps, while also recognizing regulations from the top nine global marketplaces.
On June 12, 2013, the U.S. House of Representatives passed H.R. 1256 by a vote of 301-124.