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Gensler Discusses Swaps

On May 22, CFTC Chairman Gary Gensler (along with SEC Chairman Mary Schapiro) testified before the Senate Banking committee regarding the CFTC's implementation of Dodd-Frank, international harmonization of swaps market reforms, and the CFTC's role in overseeing markets for credit derivatives.  Chairman Gensler provided an overview of the swaps markets, noting that swaps are now a $700 trillion notional market globally.  He described how these products, originally designed to help organizations hedge risk, van have the opposite effect - particularly where international financial institutions are involved.  He also told the Committee that the CFTC had commenced an investigation into JP Morgan's recent trading in credit derivatives.

Chairman Gensler told the Committee that the CFTC has thus far completed 33 rules required by Dodd-Frank and had less than 20 to complete.  He also discussed his agency's consultations with other regulators on Dodd-Frank implementation.  Specifically, he described the CFTC's efforts with respect to swaps including transparency, central clearing, regulating swaps dealers, position limits and market integrity, and cross-border application of the reforms.  Chairman Gensler also outlined the CFTC's commitment to orderly implementation of the Dodd-Frank reforms.

Finally, he reminded the Committee that Dodd-Frank would increase the CFTC's regulatory burden as it undertakes responsibility for the swaps market, which he noted is eight times larger than the futures market.  He informed the committee "Without sufficient funding for the CFTC, the nation cannot be assured that the agency can adequately oversee these markets."

The full text of Chairman Gensler's testimony is available at



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