The House recently passed four discrete bills that address particular issues with the derivatives provisions of Dodd-Frank, including legislation to ensure there is a clear end-user exemption and legislation to address the extraterritorial application of the Commodity Future Trading Commission (CFTC)'s rules. A key thrust of the 2010 overhaul was to put new regulatory reins on derivatives, traded in a $700 trillion global market that has largely escaped supervision until now.
Here is a recap of the bills that passed:
- H.R. 634, the Business Risk Mitigation and Price Stabilization Act of 2013, would create a critical exemption for corporate end-users.
- H.R. 742, the Swap Data Repository and Clearinghouse Indemnification Correction Act of 2013, would eliminate an unworkable indemnification requirement in Dodd-Frank that would lead to a balkanized system for storing and accessing swaps data.
- H.R. 1256, the Swap Jurisdiction Certainty Act, would clarify the territorial reach of U.S derivatives regulation by exempting transactions between non-U.S swap dealers and non-U.S. counterparties.
- H.R. 1038, Public Power Risk Management Act, would help ensure that public utilities' ability to hedge their risk and minimize customer costs would not be hindered by CFTC regulation.
The White House has signaled it would veto the legislation and its prospects in the Senate are uncertain. In the meantime, the CFTC has proposed putting under its supervision all derivatives trading, including overseas trading. But the Securities and Exchange Commission has taken a narrower approach, allowing overseas derivatives trades to escape U.S. regulation if the country in which they occur has a rules system that is roughly equivalent to that of the United States.