Obama Administration Exempts 85% of Energy Derivatives Traders from Regulation
Thursday, April 19, 2012
Gary Gensler (photo: Max Hirschfeld)
On Wednesday, the Obama administration dramatically scaled back its oversight of financial institutions that deal in the $700 trillion derivatives market.
Following the passage of the Dodd-Frank reform law, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) proposed new regulations for any firm trading $100 million or more each year in derivatives tied to interest rates and commodities, including oil and gas.
At this level, only 30% of institutions would have been exempted from oversight, according to Ben Protess of The New York Times’ DealBook.
Now, though, regulators have set the oversight exemption ceiling at $8 billion worth of swaps each year—which could mean as many as 85% of derivatives traders, such as energy companies, hedge funds and banks, would avoid regulation.
It just so happens that $8 billion was the exact threshold first suggested by a group of energy companies to the SEC and the CFTC in February 2011. The energy industry engaged in massive lobbying that included an estimated 100 meetings with regulators.
The CFTC approved the revised exemption ceiling by a vote of 4-1 and the SEC did so unanimously. Gary Gensler, chairman of the CFTC, defended the rule, arguing that it will still cover the biggest banks, such as Goldman Sachs, and that $8 billion is actually a tiny figure considering that crude oil trades average $65 billion a day and the average daily swap market is $500 billion a day.
-David Wallechinsky, Noel Brinkerhoff
To Learn More:
Regulators Defend Derivatives Rule (by Ben Protess, New York Times)
Regulators to Ease a Rule on Derivatives Dealers (by Ben Protess, New York Times)
Federal Futures Regulator May Outsource Regulation to…the Futures Industry (by Noel Brinkerhoff, AllGov)
House Republican Oversight Leader Asks Big Business What Regulations They Want Changed (by Noel Brinkerhoff, AllGov)
- Top Stories
- Unusual News
- Where is the Money Going?
- U.S. and the World
- Appointments and Resignations
- Latest News
- Pentagon Orders 10,000 Soldiers to Repay Bonuses a Decade after Serving in Middle East
- Retirement Plans are worse for Teachers, Charities, Clergy and Non-Profits
- Opposition to Cleveland Indians’ Name and Logo to Get Bigger Spotlight at World Series
- Taking a Selfie is taking a Risk When You Cast Your Ballot … If You Don’t Know State Law
- Texas Included State’s Drunk Drivers and Child Support Evaders in Tally of “High-Threat” Immigrant Border Arrests