Just in:
Coffee Chains Join Bitcoin Mania with Bold Treasury Moves // Dong Yuhui’s Fujian Journey: The Sea’s Lesson – 30% Destiny, 70% Determination // Record Global Interest Drives CDB’s Dual‑Currency Bond Triumph // Results of the ixCrypto Index Series Quarterly Review (2025 Q2) & IX Digital Asset Industry Index Series Half Yearly Review (2025 1H) // Can India Emerge As The Trusted Leader Of Global South Like Earlier Years? // UAE Hits Milestone with EU Delisting From High‑Risk Financial Watchlist // Abu Dhabi’s Masdar and Iberdrola Back £5 Billion UK Offshore Wind Venture // Anhui Unveils Teaser for 2025 World Manufacturing Convention, Extending a Global Invitation to Innovate Together // IIT Delhi and TeamLease EdTech Kick‑start AI for Healthcare Executive Programme // OPEC+ Eyes Pause in Production Rises After September Surge // DNA‑Crafted Nanomachines Self‑Assemble in Water // Air Arabia Reinitiates Sharjah–Damascus Flights // Musk Alleges Grok Was Misled and Predicts Tech Breakthroughs // Sharjah Elevates Real‑Estate Platform with New Digital Portal // Celebratory 911 Club Coupe Marks Half-Century Porsche Partnership // Galaxy AI Elevates On‑Device Intelligence with Privacy at Core // Tokyo Real Estate Set for $75 Million Blockchain Shake‑Up // ADNOC Gas Signs $400 Million LNG Deal with SEFE // TÜV SÜD Appoints Interim Leadership Following CEO Transition // Qingzhen’s Zhanjie Town Leverages Ecological Resources to Drive Industrial Upgrading and Integrate Culture and Tourism for Rural Revitalization //

Swaps industry baulks at gutting Dodd-Frank

cc14d8e8 acf0 11e6 ba7d 76378e4fef24

For much of the last decade the derivatives industry has been caught in the gravitational pull of the Dodd-Frank act, the sweeping piece of legislation meant to contain the risk of another financial crisis.

Six years after its passage, US president-elect Donald Trump wants to dismantle the law. The industry, however is not racing to join him.

ADVERTISEMENT

At this week’s Global Financial Leadership Conference, a gathering of derivatives traders, discussions dwelled on topics such as the UK’s Brexit vote and artificial intelligence, not repealing Dodd-Frank.

“You can’t dismantle something after it was just put into law, when the country was basically almost knocked into the Stone Age in 2007 and 2008,” says Terry Duffy, chief executive of CME Group, the world’s biggest futures exchange and host of the conference.

Dodd-Frank contained specific remedies for over-the-counter derivatives markets, blamed for exacerbating the last crisis and the reforms sparked robust lobbying from banks and brokers at the start of the decade.

Gary Gensler, then chairman of the Commodity Futures Trading Commission sought to break the bank-dominated dealer model and cut the web of interbank exposures. New rules mandated that generic swaps, with notional values in the billions, had to be traded on electronic marketplaces known as swap execution facilities (Sefs). More of the market, with a gross market exposure of $20tn, was pushed through central clearing houses and reported to data warehouses.

“I haven’t seen calls to dismantle Title 7 [the derivatives section of Dodd-Frank]. Quite the contrary — what I’ve seen is a growing consensus that the reforms made sense,” says Timothy Massad, the current CFTC chairman.

ADVERTISEMENT

For some in the swaps industry, Mr Trump’s victory offers hope of minor but significant tweaks. Michael Spencer, chief executive of ICAP, calls the rules well intentioned but “overdesigned and overengineered … a repeal or review of Dodd-Frank would be a good thing for the market as a whole”.

Even so, many executives think abolishing the law is a step too far. “I think there’s some fringe things that he can do on Dodd-Frank, [but] there’s no way in my opinion that he can go in there — I think it would even scare the Republicans — and say we’re going to dismantle it and have no laws and go back to what we had in 2007 and prior,” says Mr Duffy.

One reality is that Dodd-Frank and a push to electronic trading have become embedded in markets.

“In some respects it will be just as costly to take out as put in,” says the chief executive of a swaps trading venue who declined to be identified. “People have changed their methods for interacting with the market. Regulations have helped drive the changes. In Treasuries it took 10 years [to go electronic] but in swaps it was just one year.”

There are also potentially limits to change as the mandate was part of a global G20 commitment to bolster over-the-counter markets with clearing and trade reporting. Many have recognised the US’s rules as equivalent

Complaints around the rules are legion, particularly for Sefs. Many market participants complain that these venues have split the global swaps market, particularly as traders in Europe shy away from interacting with US counterparts.

Trading between European and US dealers comprised 28.7 per cent of market share at the time of the introduction of Sefs in September 2013. That had fallen to 7.6 per cent by the end of last year, according to data from Isda, the trade association.

That bifurcated market creates pricing problems. Brokers at ICAP’s London-based Sef talk to dealers about prices “on-Sef” and “off-Sef”. “Every day there’s a conscious decision to switch trading to a Sef from a European platform,” says one broker.

Others say Sefs are not the lightly-controlled markets they were intended to be. “There’s not a big gap between running a Sef and running a futures market,” says the chief executive of another Sef, who declined to be identified.

But industry executives say it’s possible for regulators to fix problems without ripping apart the law. Annette Nazareth, partner at Davis Polk in Washington, points out that “there’s an awful lot an agency can do outside the legislative process, via rules interpretations or amendments.”

“Right now the US is on the bleeding edge in implementing this part of the 2009 G20 agreements … so the swaps execution mandate would be the easiest to roll back and most at risk,” says David Weiss, an analyst at Aite Group, a capital markets consultancy.

Furthermore, a blueprint for reform already exists. Two years ago Christopher Giancarlo, a commissioner at the CFTC, published an 89-page white paper advocating reforms. As the sole Republican commissioner, he has also been widely discussed as a possible new CFTC chairman under a Trump administration. 

While he backed central swaps clearing and reporting trades to repositories, he also strongly criticised trading rules. They were overly prescriptive, had significant policy changes buried in footnotes, and had failed to achieve their goals by misapplying the futures market model to the swaps market.

More critically, he argued that the rules had overstepped their mandate from Congress. Instead, he advocated more flexible regulation based on existing practices and allowing for greater choice for dealer and brokers. “It would promote healthy global markets by regulating swaps trading in a manner well matched to the underlying market dynamics,” he argued.

Putting significant policy rulings into footnotes makes them easier to change, lawyers say.

However, the changes may have other effects, particularly for global efforts to harmonise financial regulations to similar standards. The European Commission says it is too early to tell what the priorities will be and is continuing its daily contacts with counterparts in the US.

“We very much hope that the future US administration will work with the EU to help consolidate the G20 financial reform agenda,” a spokesperson said.

Source link


Notice an issue?

Arabian Post strives to deliver the most accurate and reliable information to its readers. If you believe you have identified an error or inconsistency in this article, please don't hesitate to contact our editorial team at editor[at]thearabianpost[dot]com. We are committed to promptly addressing any concerns and ensuring the highest level of journalistic integrity.


ADVERTISEMENT
Just in:
DNA‑Crafted Nanomachines Self‑Assemble in Water // UAE Hits Milestone with EU Delisting From High‑Risk Financial Watchlist // Abu Dhabi’s Masdar and Iberdrola Back £5 Billion UK Offshore Wind Venture // Nvidia is the dream stock of our lifetime! // BoE charts new wholesale terrain for stablecoins and tokenised assets // Celebratory 911 Club Coupe Marks Half-Century Porsche Partnership // Record Global Interest Drives CDB’s Dual‑Currency Bond Triumph // Nigeria’s Coastal Highway Passes $747 m Funding Milestone // Tokyo Real Estate Set for $75 Million Blockchain Shake‑Up // TÜV SÜD Appoints Interim Leadership Following CEO Transition // Can India Emerge As The Trusted Leader Of Global South Like Earlier Years? // CGTN: Beauty in diversity: How wisdom at Nishan Forum inspires global modernization // OPEC+ Eyes Pause in Production Rises After September Surge // Ten Tips for a Healthy Summer Garden // Qingzhen’s Zhanjie Town Leverages Ecological Resources to Drive Industrial Upgrading and Integrate Culture and Tourism for Rural Revitalization // Results of the ixCrypto Index Series Quarterly Review (2025 Q2) & IX Digital Asset Industry Index Series Half Yearly Review (2025 1H) // Galaxy AI Elevates On‑Device Intelligence with Privacy at Core // Sharjah Elevates Real‑Estate Platform with New Digital Portal // IIT Delhi and TeamLease EdTech Kick‑start AI for Healthcare Executive Programme // Behomes Launches Behomes Hub – Cashback & Networking App for Real Estate Professionals //