Former CFTC chairman Philip McBride Johnson on why swap market participants should have been more careful in their early lobbying on Dodd-Frank.
Recently, the Bloomberg organisation (see: New York City
mayor) tried unsuccessfully to have a federal court nullify a
decision by the US Commodity Futures Trading Commission to
require higher collateral deposits for swaps than for futures
contracts. The inference is that collateral (or margin in
futures parlance) should be the same throughout because there
is no reason to distinguish between them.
Three years ago, the swaps community waged an aggressive
(and largely successful) campaign in the US Congress to make
sure that their business - soon to be regulated under the
Dodd-Frank Act - was treated quite differently from the futures
and options markets that the CFTC and its predecessors had
regulated for almost 90 years.
They wanted (and got) new registration categories for their
centralised trading venues (swap execution facilities rather
than the traditional designated contract market approval) and
for their swap sellers (swap dealers rather than futures
commission merchants that applies to regulated futures
contracts and options).
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