On August 17, Gary Gensler, Chairman of the Commodity Futures Trading Commission, sent to the ranking members of the several congressional committees with jurisdiction over financial services reform recommended enhancements to the Over-the-Counter Derivatives Markets Act of 2009, which the U.S. Treasury Department submitted to Congress last week (the Treasury Bill). The recommended enhancements include:

  • Removing the exemption for foreign exchange swaps contained in the Treasury Bill and narrowing the proposed exclusion for foreign exchange forwards
  • Extending the provisions mandating clearing and exchange trading of standardized swaps to include transactions involving counterparties that are not “swap dealers” or “major swap participants”
  • Amending the Bankruptcy Code to afford counterparties of swap dealers protections and preferences similar to those currently provided customers of commodity brokers
  • Repealing provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 that permit banks and multilateral clearing organizations to clear over-the-counter derivatives
  • Replacing the proposed CFTC and Securities and Exchange Commission dual regulation of “mixed swaps” with a system where regulatory responsibility is assigned based on the primary component of the mixed swap