WASHINGTON (Reuters) - U.S. markets regulators on Friday unveiled an agreement on how much capital and margin firms must hold when trading swaps based on securities, finalizing a key piece of the 2010 Dodd-Frank law introduced following the 2007-09 financial crisis.
The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) agreed to fend off a regulatory overlap that would have drastically increased the capital burden for many firms already operating under CFTC rules, the regulators said.
The agreement underscores an unusual degree of harmonization between the two U.S. markets watchdogs and comes amid a broader push by two appointees of U.S. President Donald Trump - SEC Chairman Jay Clayton and CFTC Chairman Christopher Giancarlo - to coordinate more closely on policy and enforcement matters.
Friday’s announcement was a relief for the industry, which had worried the SEC’s final rule could potentially put many firms out of business.
“Moving these rules is a positive development in getting a big piece of Dodd Frank Title VII over the finish line, completing the mandate that Congress gave us,” Republican Commissioner Hester Peirce, who led the SEC rule-writing effort, said in an interview.
Title VII of Dodd-Frank handed the CFTC oversight of the vast majority of the U.S. swaps market, including interest rate and foreign exchange swaps, but gave the SEC oversight of the small slice of the swaps market based on individual securities.
Swaps are a type of private derivative contract between two parties, typically banks, that allow investors to hedge the risk of future asset price movements, such as interest rate rises.
Dodd-Frank aims to make the swaps market
