The CFTC announced earlier today that it will not complete the rule-writing process for the derivatives market until the first quarter of 2012. Chairman Gensler stated that the CFTC is “focused on considering these rules thoughtfully – not against a clock.” Under the Dodd-Frank Act, Congress directed the CFTC to regulate the over-the-counter derivatives market, which had been largely unregulated. The Act required the CFTC to complete more than 60 rules by July 2011, but the rulemaking process has been delayed and only 12 rules have been completed.
The CFTC outlined the rules it will consider in the remainder of this year, which include data recordkeeping and reporting rules, external and internal business conduct (duties, recordkeeping and chief compliance officers), entity definitions and registrations and real-time reporting rules.
The most contentious and anticipated rules will be finalized in the first quarter of 2012. They include the capital and margin requirements for derivative trading and rules governing the operation of swap-execution facilities, where the trading will take place. Other rules that will be considered in the first quarter of 2012 include governance, conflict of interest and conforming rules.
Although the rulemaking process has been delayed, leaving areas of the financial markets unregulated, the CFTC will not require companies to comply with the derivative rules until all rules are finalized. Even if the proposed rules are finalized on time, they will not take effect until the third quarter of 2012, at the earliest.