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UPDATE 1-Swaps regulator slams House bill aimed at reforming agency
May 14, 2015 / 6:27 PM / 3 years ago

UPDATE 1-Swaps regulator slams House bill aimed at reforming agency

(Adds detail on metals warehouses)

By Douwe Miedema

WASHINGTON, May 14 (Reuters) - The head of the U.S. derivatives market regulator on Thursday slammed a bill in the House of Representatives to reauthorize the agency, saying the new mandate would make it harder for it to respond quickly to market events.

The Commodity Futures Trading Commission has raised its profile significantly after the 2007-09 financial crisis, imposing billions of dollars of fines on large Wall Street banks that rigged the Libor interest rate benchmark.

“Many of the provisions in the bill ... are either unnecessary or impose requirements on the Commission that would make it harder to fulfill our mission,” CFTC Chairman Tim Massad said in a letter to Rep. Michael Conaway. Conaway heads the House Agriculture Committee, which oversees the agency.

The Committee on Thursday approved the bill to reauthorize the CFTC, something that must happen every five years. In practice, the agency has operated for several years without that stamp of approval. The Senate is preparing its own bill.

“I have some important disagreements with how his Commission operates, not excluding the manner of how Chairman Massad chose to express his concerns,” Conaway said in a statement.

The CFTC would also have to keep close tabs on metals warehouses, which have been blamed for driving up prices of aluminum by causing long waiting queues, under an amendment added to the bill by Rep. Bob Goodlatte.

Complaints about inflated prices and long wait times to take delivery of metals have plagued the London Metal Exchange, which is regulated in Britain by the Financial Conduct Authority, while the CFTC holds sway over its U.S. business.

The 2010 Dodd-Frank Act forced the LME to renew its CFTC registration, and the bill would require the agency to tell Congress about the status of that application, and to insert critical language in a report about the issue.

The bill’s most controversial part includes reforms to the agency that would diminish the powers of the chairman while giving other members of the commission a greater say in decisions about regulating swaps and futures markets.

Massad’s predecessor, Gary Gensler, often antagonized markets by pushing through his ambitious agenda at breakneck speed after the financial crisis, but Massad has taken many steps to fine-tune the rules since coming into office last year.

In a separate hearing for a Senate committee, Massad said his agency needed new powers to impose bigger fines on firms and individuals who break the law. (Additional reporting by Sarah N. Lynch; Editing by Bernadette Baum)

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