Frank Says His Bill May Leave ‘Gaps’ in Derivatives Regulation
By Dawn Kopecki and Tina Seeley
Oct. 7 (Bloomberg) -- U.S. Representative Barney Frank said he will “tighten up” his plan to revamp oversight of derivatives after regulators said it left loopholes.
“There are some areas here where there are gaps that shouldn’t have been there,” Frank, a Massachusetts Democrat, said at a hearing today of the House Financial Services Committee he heads.
Representatives of the Securities and Exchange Commission and the Commodity Futures Trading Commission told Frank’s panel there are flaws in the draft he introduced on Oct. 2 to regulate the $592 trillion over-the-counter derivatives market.
“Certain aspects of the discussion draft could unintentionally preserve existing regulatory gaps,” Henry T.C. Hu, director of the SEC’s new division of risk, strategy and financial innovation, told the committee.
CFTC Chairman Gary Gensler said the legislation shouldn’t let hedge funds or financial firms evade requirements that their derivative contracts go through central clearinghouses. He also said the proposal is unclear on whether the regulator would have to determine on a case-by-case basis whether swaps would be subject to clearing.
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