Speaking just days after Gary Gensler, chairman of US derivatives regulator the Commodity Futures Trading Commission (CFTC), admitted that key elements of the Dodd-Frank Act will not be implemented until next year, CFTC commissioner Scott O’Malia confirmed the new rules would take effect by the end of 2012 “at the earliest”.
The revelation came as O’Malia set out details of the timeline under which new rules for OTC derivatives trading and clearing are likely to be introduced.
Dodd-Frank has already been pushed back several times from its original target date of July 2011. It has also been attacked by Craig Donohue, head of Chicago-based derivatives exchange CME Group, for failing to take adequate account of the costs and benefits of its proposals.
To add insult to injury, it was revealed last week the Volcker rule, which had been expected to come into effect in October, cannot now meet its deadline following delays in agreeing a draft proposal.
O’Malia explained that the CFTC had issued 57 draft rules in total, of which only 12 have so far been completed. He expressed hope that by the end of Q1 2012 all the rules will have been written and passed, but added that due to the 90-day implementation period which must follow, the rules could not feasibly be implemented until Q3 – with a later date considered much more likely.
Dodd-Frank contains provisions intended to move as large a proportion of OTC derivatives as possible onto new, centrally cleared swap execution facilities, in an effort to reduce systemic risk in the OTC markets. The Act also contains other measures, such as a ban on prop-trading, directed at shoring up market integrity and stability.