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U.S. swaps regulator calls vote on cross-border rule

Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), listens during an interview with Reuters in London October 2, 201
Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), listens during an interview with Reuters in London October 2, 201

By Douwe Miedema

WASHINGTON (Reuters) - The top U.S. derivatives regulator will meet next week to vote on how its rules apply to foreign companies that want to do business with U.S. firms, a sign it may be nearing a compromise on a thorny issue that has invoked the wrath of foreign regulators.

The Commodity Futures Trading Commission announced a formal meeting for July 12 to decide how new rules it has written to regulate the $630 trillion swaps markets apply to companies abroad.

The issue has split the CFTC for many months as it started writing new rules to rein in the lucrative swaps market, dominated by banks such as Citigroup Inc, Bank of America Corp and JPMorgan.

Chairman Gary Gensler, a Democrat who is widely expected to leave when his term expires at the end of the year, has insisted foreign companies comply with the CFTC's rules if they want to do business with U.S. companies.

The rules are an effort to make the opaque derivatives market safer after the financial crisis, and prevent risk that affects U.S. companies from building up abroad. But banks have complained it would subject them to cumbersome and redundant regulation.

And European Union financial services czar Michel Barnier has said America should rely on similar rules that are being drawn up in other jurisdictions, after a 2009 global agreement to rewrite the rules for banking.

U.S. banks complained last year that foreign clients started defecting as it was unclear whether they needed to comply with the CFTC's rules. Banks fear they will lose more customers if the regulator can reach no compromise.

The last day the agency can resolve the issue is July 12, because a broad exemptive relief it granted foreign companies expires on that day.

One commissioner, Bart Chilton, said he welcomed what he said was "an appropriate compromise." Chilton is also a Democrat, and his vote for any proposal was not in doubt.

Mark Wetjen, the third Democrat and a key vote for any majority Gensler aims to clinch, has sounded less sure and asked for a delay in a speech last week.

"I am confident we can get to agreement on the guidance, but not sure we can accomplish that before July 12," Wetjen said on a conference call with journalists this week.

In its invitation for the meeting, the CFTC said that it would discuss both its final guidance on how its rules apply abroad, as well as a new order that would set deadlines in a phased approach for compliance.

(Reporting by Douwe Miedema; Editing by Lisa Shumaker)

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