Only President Obama's signature is now required for the Act
to become law.
Exactly how the Act will change financial services - and in
particular derivative markets - is anyone's guess at present.
It will be three or four years before many of the requirements
are implemented, and wide scope is given for regulators to make
policy to address the Act's overall aims. Some of these
policies are only to be made once the regulators have conducted
studies into the issues.
During that time market participants are sure to lobby for
rules that suit them, and the political, economic and financial
markets climates will also change.
Moreover, the lobbying and political battles that have already
shaped the Act during its year-long process of formation have
left it a twisted, convoluted thing, full of complexities and
exceptions. This will give even more scope for regulators to
influence the law's effects through the way they apply it, and
for market participants to wriggle round its
In what may be a hint of how the odds are stacked between the
industry and the regulators, the Wall Street Journal
reported this afternoon that the Commodity Futures Trading
Commission had appointed 30 teams of staff to work on different
aspects of the legislation, while JP Morgan Chase had set 100
teams to work. It also said the CFTC had asked for $25m more
funding to address its new tasks.
Among the CFTC’s responsibilities –
many of them to be discharged in cooperation with the
Securities and Exchange Commission – will be:
- deciding which kinds of derivative should be subject to
mandatory central clearing
- overseeing the over-the-counter market for the first
- considering the findings of a six month study by the
Financial Stability Oversight Council into how to implement the
Volcker Rule (banning banks from proprietary trading), a
limited version of which is in the Act, and then adopting rules
to carry it out.
Philip McBride Johnson, a past chairman of the futures
regulator, has pointed out that
the CFTC and SEC have in the past struggled to agree on
policymaking when charged to come up with joint rules by
Click here for FOW’s quick guide to the
Act’s provisions on proprietary trading and
banks’ swap desks.
Jon Hay +44 207 779 8372 firstname.lastname@example.org