U.S. delays oversight of derivatives overseas
WASHINGTON — A policy allowing a U.S. agency to regulate derivatives trading overseas to help reduce risks to the global financial system will be delayed under a vote Friday.
The Commodity Futures Trading Commission voted 3-1 to stagger the effective dates for the policy. The delay marks a middle ground between Chairman Gary Gensler, who wanted to extend the CFTC's regulation to overseas markets now, and Wall Street banks, which opposed extending its reach.
The Obama administration favored a delay to allow foreign regulators to finalize their own rules for derivatives oversight.
A derivative is an investment that's based on the value of an underlying asset, such as oil or corn or dollars. Bad bets on risky derivatives, and lax regulation of them, were a leading cause of the 2008 financial crisis.
The CFTC policy applies new rules governing the $700 trillion derivatives market to U.S. banks' foreign affiliates that trade derivatives and to U.S. trading operations of foreign banks.
The agency's new oversight rules were mandated by the 2010 financial overhaul law. One requires banks that trade derivatives to put up money to cover potential losses. Another would require most derivatives to be traded in clearinghouses to make prices more transparent.
Under Friday's vote, the new rules would be phased in overseas starting in September.
The CFTC commissioners also agreed to have European regulators monitor derivatives trading in their countries if their oversight rules closely resemble the CFTC's. By March, European banks with trading operations in the United States will have to meet the requirements.
On Thursday, the CFTC and the European Commission announced an agreement to coordinate their derivatives rules.
“What happens in one nation impacts another,” Commissioner Bart Chilton said before the vote. “Risk travels around the globe with a click of the mouse.”
Proponents of the wider reach for the CFTC say regulations overseas tend to be weaker and that stricter supervision is needed to reduce the risk to the broader financial system.
Banks and other opponents counter that the CFTC's rules will make it harder for U.S. firms to remain competitive in some foreign markets.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Mylan CEO Bresch sets sights on growth
- UPMC buying New Castle-based Jameson Health System
- U.S. Steel to restructure Canadian subsidiary, halt 2 U.S. expansion projects
- 2 top executives at Dick’s Sporting Goods to retire
- EPA extends comment period on power plant proposal
- Tobacco growers forced to find profits as buyout checks end in October
- American Airlines agents vote to join union
- Pa. considers $300,000 plan to clean polluted site in Kennedy
- Fed speculation fuels stock gains; Dow rises 100 points
- Envelopes in Marriott hotels invite tips for maids
- UPS expects to hire up to 95K seasonal workers