One year after the passage of Dodd-Frank's provisions on swap regulation absolutely nothing has been implemented. And judging by the just announced yet another 6 month delay of rule implementation, it now appears pretty much certain that the $600 billion derivatives market will never be actually regulated, courtesy of conflicted interests at the CFTC. "The U.S. Commodity Futures Trading Commission proposed delaying rules for the huge derivatives market that had been automatically set to go into effect on July 16. One year after the passage of the Dodd-Frank financial overhaul that ordered a crack-down on the $600 trillion derivatives market, regulators have not been able to meet the deadline for translating the legislation into specific provisions. That prompted the CFTC on Tuesday to propose delaying some of the so-called "self-executing" rules until as late as the end of the year." After all, it is the CFTC's sworn duty to do anything to help the poor OTC traders who may experience a modest drop to their multi-million year end bonuses if profit margins are cut into by regulatory intervention: "Traders had feared that billions of dollars in transactions might suddenly fall into legal limbo. Without relief from the CFTC, a delay could have caused those contracts to lose the legal protection afforded them by a clause in the Commodity Futures Modernization Act of 2000 that created a framework that stated they were not illegal off-exchange futures." But lest someone suspect the fine upstanding gentlemen at the CFTC led by former Goldman Sachs employee Gary Gensler who has absolutely no interest in seeing his old firm continue along the confines of the status quo (very much like that other form Goldmanite Hank Paulson), the CFTC did provide this brilliant clarification: "The temporary relief proposals have "nothing to do with any outside pressure one way or the other to extend the rule-making or the effective date," a CFTC staff member said." Well, if they say so, it must be true.
More on why absolutely nothing will ever change until the next blow up which since it is backstopped by every central bank in the world, will be the very last one. From Reuters:
Those granted temporary relief from the new guidelines include transactions in exempt or excluded markets -- primarily in financial, energy and metals -- as well as measures that do not require rule-making but refer to terms such as swap, swap dealer or major swap participants that must be further defined by regulators.
"The exemptive relief that's being granted by the Commission would allow virtually all the same types of transactions conducted now to continue during this period," a CFTC staff member told reporters ahead of an agency meeting.
The relief measures became necessary after the CFTC said it would miss the July 16 deadline to write regulations for the over-the-counter derivatives market.
The delay risked a legal void for trades that would be caught between the current regulatory framework, which ends next month, and and not yet offered protection under as-yet unfinished new rules.
Mutually Assured Destruction is here again:
Without some type of short-term fix until the new rules are in effect, Wall Street investors worried the market would be thrown into chaos, casting doubt on the legality of derivatives trading and stoking fears of dried-up liquidity and an exodus to offshore trading.
The exemptions, which are open to a 14-day public comment, would last through Dec. 31, unless the rules go into effect first. The temporary relief would not apply to measures already in effect, or on futures contracts, options on futures, or transactions by retail customers in foreign currency or other commodities.
We are happy to bet any amount of single ply toilet dollars that come December 31, absolutely nothing will change, and the CFTC will indicate that traders are horrified of the market destrcution that would ensue should a 2 year old law (at that point) be finally enforced:
"Six months will provide the Commission with the opportunity to re-examine the status of final rule making in light of the changed regulatory landscape at the time," said CFTC Chairman Gary Gensler at the agency's meeting on Tuesday.
The CFTC said the proposals "provide the needed clarity for market participants" and should address any legal concerns for swaps beginning on July 16. Still, some industry watchers questioned whether the CFTC has enough legal power to propose these measures.
And with Republican now at the helm, expect deregulation (even with regulation effectively at zero as is), to become the name of the game:
The first comprehensive U.S. regulation of the swaps market is on track to be implemented this year, but Republican lawmakers have introduced legislation to slow down the process.
The temporary relief proposals have "nothing to do with any outside pressure one way or the other to extend the rule-making or the effective date," a CFTC staff member said.
And the punchline is that Wall Street which ultimately pushed so hard for this first of many delays, now blames the CFTC:
Wall Street banks and major market players have said they are equipped to comply with derivatives reforms, but accused U.S. regulators of dragging their feet on clarifying how and when they will go into effect.
In other news, let the rape and pillage of the global middle class continue. After all, that is the status quo.