House Passes Trio of Derivatives Bills
The U.S. House of Representatives pulled a hat trick this week, passing three bills related to OTC derivatives.
H.R. 634, the Business Risk Mitigation and Price Stabilization Act of 2013, which passed the House 411-12, exempts manufacturers, ranchers and small companies that buy and sell derivatives in order to hedge against business risk from burdensome margin and capital requirements of the Dodd-Frank Act.
“The House passage today of this bill is a victory for Main Street companies that are trying to help grow the U.S. economy and create American jobs while competing in a global economy,” said Michael Bopp, counsel to the Coalition for Derivatives End-Users. “The strong bipartisan approval for this targeted, pragmatic and sensible clarification shows that lawmakers can come together to alleviate unintended consequences of the Dodd-Frank Act.”
A bi-partisan majority of the House of Representatives passed H.R. 1256, the Swap Jurisdiction Certainty Act, which seeks to address cross-border application of derivatives regulation under Title VII of the Dodd-Frank Act by requiring coordination in rulemaking between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).
“We applaud the House for passing this important legislation, and for appropriately recognizing the importance of how derivatives regulations are applied extraterritorially,” said Sifma president Kenneth Bentsen. “Derivatives markets are global in nature, and as such regulators here and abroad must work together to ensure national rules are consistent and coordinated at a global level.
The CFTC and SEC currently approach cross-border application in different ways, which warrants the need for the legislation, which also seeks to establish a mechanism for recognizing similar rules in foreign jurisdictions with broadly equivalent regimes for swaps, to help address the concerns expressed by numerous foreign regulators.
The House passed, by a 420-2 vote, the Swap Data Repository and Clearinghouse Indemnification Correction Act of 2013 (H.R. 742), which will help ensure that regulators and the public continue to have access to a consolidated and accurate view of the global marketplace, including concentrations of risk and market exposures.
Depository Trust & Clearing Corp. “applauds the House of Representatives for taking decisive action today to maintain the current high level of transparency of over-the-counter (OTC) derivatives markets,” said DTCC general counsel Larry Thompson. “This has sent a clear message that Congress is committed to avoiding fragmenting the current global data set for OTC derivatives and is strongly committed to global data sharing. We urge the Senate to move swiftly in taking up this legislation and resolve issues surrounding the indemnification provisions and confidentiality requirements of the Dodd-Frank Act.”
Phase 5 of the uncleared margin rules (UMR) took effect from September 2021.
Temporary equivalence is set to expire on June 30 2022.
IRS trading volumes have fragmented without an equivalence agreement.
Phase 5 of the uncleared margin rules came into effect on 1 September.
Triparty repos can be executed across U.S. Treasury securities to central clearing.