Clarke Dryden Camper is Senior Vice President, Head of Government Affairs and Public Advocacy at NYSE Euronext, a...
Yesterday, the House Financial Services Committee approved a series of bills attempting to steer CFTC efforts to regulate derivatives trading under the Dodd-Frank Act. Committee Chairman Spencer Bachus (R-AL) said the legislation will “bring much needed certainty” to the derivatives market and ensure that “end-users are able to efficiently hedge their risks.” Ranking Democrat Barney Frank (D-MA) accused Republicans of “finding the weakest links” in an effort to undermine enforcement of Dodd-Frank.
According to the Committee description, the bills would:
Frank said the changes would reduce transparency in derivatives trading because under the legislation some transactions would not be listed until “after [the trade] had been consummated.” Yet fellow Democrat Congressman Jim Himes (D-CT) said there are specific occasions, such as for illiquid securities, “where one trade will move the market very substantially, where good execution would actually mean something much more strategic” than full pre-trade transparency:
“If you are going to buy a Ford Focus, you go online, you look at 20 dealers around and – boom – you hit the best price. If you are going to buy a 1950 Aston Martin, and there are two in the world, it’s a very different dance…The CFTC in pursuit of a good goal, which is creating more pricing transparency, has recommended a lot of protocols that would be good for buying a Ford Focus” but not the Aston Martin.
Now the bills will move to the House floor for a vote by the full House. Meanwhile, most observers expect the bills to get little traction in the Senate.