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The new regulation of swaps: a lost opportunity.

INTRODUCTION

Profound changes in regulation followed the financial crisis of 2008 in the United States. These changes, embodied in the Dodd-Frank Act (Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376, 2010), are the most significant since the Great Depression of the 1930s. Yet remarkably, the drafters of the Dodd-Frank Act did not seize upon this unique opportunity to alter and improve the regulatory structure in the United States--a uniquely byzantine structure that developed, largely through historical accident, over the course of several decades. The U.S. regulatory system has multiple regulators on the federal and state level, many with overlapping jurisdiction. The result has been both overregulation and underregulation--in some cases, the same entity may be subject to different (and perhaps inconsistent) regulation for the same activity, while in other cases certain activities may remain unregulated in the middle of a complex regulatory patchwork.

The Dodd-Frank Act--an 849-page bill that includes 398 rulemaking requirements, (1) implicates 25 regulators and creates 2 new ones--has perpetuated these flaws. This article focuses on one of the clearest examples of complication in the U.S. regulatory structure exacerbated by the Dodd-Frank Act--the division of the regulation of securities, futures and (now) swaps between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The article examines the troubled history of these two federal agencies and their struggles over jurisdictional issues since the CFTC's creation in the 1970s. It discusses previous executive branch considerations to merge the agencies and the Obama Administration's unfortunate retreat from such efforts in the face of Congressional opposition. The article then focuses on the present and future, exploring how the Dodd-Frank Act furthers the historical issues through its regulation of swaps.

BACKGROUND (2)

Established in 1934--in the aftermath of the Great Depression--the SEC was for many years the primary financial markets regulator in the United States. The Securities Exchange Act of 1934 gave the SEC oversight authority over securities markets, securities market intermediaries (such as broker-dealers), securities transfer agents and securities clearinghouses. Commodities and futures, which traditionally referenced agricultural products, were regulated under the Commodity Exchange Act (CEA) by the Commodity Exchange Authority, then part of the Department of Agriculture.

Legend has it that, when Congress was considering sweeping amendments to the CEA in 1974, White House officials contacted Ray Garrett, Jr., then-Chairman of the SEC, offering to give the SEC regulatory jurisdiction over the commodity futures industry. Viewing commodity futures as agricultural rather than financial products, Chairman Garrett declined the offer. Congress subsequently created the CFTC (see Constantinides et al., 2003).

Chairman Garrett apparently failed to realize that by the 1970s the commodity exchanges were beginning to trade futures contracts involving assets and industries that were not agricultural. For example, in 1972, the Chicago Mercantile Exchange (CME) launched futures on foreign currencies, and somewhat later the New York Mercantile Exchange (NYMEX) began trading futures contracts in heating oil. By 1975, futures transactions were no longer regulated by the Department of Agriculture or by the SEC, but rather came under the jurisdiction of the CFTC.

The blurring of the line between the CFTC's and SEC's jurisdiction has continued ever since. The 1974 amendments to the CEA gave the CFTC exclusive jurisdiction, for example, over 'futures' on 'commodities' (see Guttman, 1978). Because the CEA defines the term 'commodity' broadly, battles quickly ensued over products that had attributes of securities, futures and derivatives on securities and futures. For example, controversy arose after the Chicago Board of Trade (CBOT) challenged the SEC's claim of jurisdiction over options on Government National Mortgage Association (GNMA) certificates, which the SEC had allowed to be traded on the CBOE. The dispute could not be settled and was litigated; the Seventh Circuit agreed with the CBOT that the CFTC had exclusive jurisdiction over these contracts.

To try to mend the jurisdictional schism, while the GNMA case was being litigated, the Chairman of each agency--John Shad of the SEC and Philip Johnson of the CFTC--negotiated a jurisdictional solution, which was later codified in legislative amendments in 1982. At its core, the Shad-Johnson Accord provided for CFTC regulation of futures (including on government securities and broad-based stock indexes), options on futures and commodities and SEC regulation of securities-based options. Trading in single stock and narrow-based index futures (other than on certain exempted securities) was prohibited (see GAO, 2000). Unfortunately, the Shad-Johnson Accord failed to address the many new products that would later rest on the borders of the agencies' jurisdiction. Several jurisdictional struggles were resolved through litigation, a slow and deeply flawed approach to the regulation of an evolving financial market (see Benson, 1991).

The Agencies continued this inartful and inefficient jurisdictional division through the 1980s and 1990s. In 2000, Congress passed the Commodity Futures Modernization Act (CFMA) (see Esau, 2000. See also Nazareth, 2009). In addition to largely deregulating the institutional futures markets and permitting the sale of single stock and narrow-band futures contracts under both SEC and CFTC jurisdiction, the CFMA, among other things, broadly defined a class of 'swap' contracts and expressly exempted these contracts from CFTC and SEC jurisdiction as long as they were entered into by sophisticated market participants, known as 'eligible contract participants'. As a result, for the next 8 years, the market for interest rate, credit default, currency, commodity and other swaps through bilateral relationships blossomed with little regulatory oversight or market transparency. While it is fair to say that swaps were by no means the cause of the 2008 financial crisis, in the view of many, the complex web of relationships that developed, poorly understood by the market participants as well as regulators, created significant systemic risk that manifested itself in the credit crisis.

Even before the financial crisis, U.S. regulators had started thinking of ways to streamline the complex U.S. regulatory structure. In 2008, the Treasury Department under Secretary Henry Paulson issued a Blueprint for a Modernized Financial Regulatory Structure (U.S. Department of the Treasury, 2008). The Blueprint was a response to concerns that the U.S. financial markets were losing their dominance and that this was due in part to an inefficient regulatory structure. The Blueprint was more conceptual than concrete in nature, but among its many recommendations was a proposal to merge the SEC and the CFTC.

At the end of 2008 came the financial crisis. Among the new President Obama's primary policy goals was the reform of the financial markets to ensure that a repeat would not occur. As a result, in 2009, President Obama called upon the Treasury Department, led by Treasury Secretary Timothy Geithner, to develop regulatory and supervisory reforms to respond to the causes of the financial crisis. The resulting report, entitled 'Financial Regulatory Reform; A New Foundation: Rebuilding Financial Supervision and Regulation' and generally known as the 'White Paper', suggested significant reforms to the financial system including a new and comprehensive regulatory approach to derivatives (U.S. Department of the Treasury, 2009).

Unlike the Paulson Blueprint, the Geithner White Paper did not recommend merging the SEC and the CFTC. This decision, undoubtedly influenced by political resistance from the Chairmen and members of the Congressional oversight committees who refused to relinquish oversight authority, and the campaign contributions that are generated from the industries they oversee, was destined to have a profound effect on the regulation of the derivatives market as established under Dodd-Frank.

With more than 2 years of hindsight since Dodd-Frank's passage, the bill's namesake, Representative Barney Frank, introduced the Markets and Trading Reorganization Act, which would merge the SEC and the CFTC into a new Securities and Derivatives Commission. Frank called the separation of the SEC and CFTC 'the single largest structural defect in our regulatory system' but argued that attempting to merge the agencies in the Dodd-Frank Act would 'almost certainly have caused the defeat of that legislation' (House Financial Services Committee Democrats, 2012). Given that Frank introduced this bill just weeks before retiring from Congress, it is unlikely to do more than renew discussion on the topic.

DODD-FRANK

The statutory division of jurisdiction

On 21 July 2010, President Obama signed the Dodd-Frank Act into law. Among the Dodd-Frank Act's major goals was reform of the derivatives markets--particularly the credit default swaps, interest rate swaps and other 'swaps' traded over-the-counter that the CFMA had left largely unregulated. Dodd-Frank's plan for regulation of the swaps market includes registration and significant regulation of the 'swap dealers' and 'major swap participants' that are the primary players in the swap market; centralized clearing of swaps to decrease systemic risk; exchange or 'swap execution facility' trading of swaps to increase pre-trade transparency; reporting and recordkeeping to arm regulators and the market with information about the previously opaque swaps market; position limits; business conduct requirements; collateral segregation requirements; and a host of other regulations.

The Dodd-Frank Act did not merge the SEC and the CFTC, nor does it give one agency complete control over the swaps market. In contrast, in order to appease both agencies, Congress divided jurisdiction of the US $600 trillion swaps market along Shad-Johnson-like lines. Congress granted the CFTC the lion's share of the jurisdiction. The CFTC was given authority over a very broadly defined universe of 'swaps', including interest rate swaps, commodity swaps, agricultural swaps, currency swaps and swaps (including credit default swaps) based on broad-based indices of securities. The SEC was left with jurisdiction over a narrowly defined subset of 'security-based swaps' that includes swaps on a single or narrow-based index of securities primarily single-name or narrow-based credit default swaps and total return swaps. The agencies share jurisdiction over a narrow set of 'mixed swaps' with attributes of both 'swaps' and 'security-based swaps'.

Controversy over whether the $25.6 trillion foreign exchange swap market should be regulated led to a compromise--Dodd-Frank included 'foreign exchange swaps' and 'foreign exchange forwards' in the definition of 'swap', making these instruments subject to the CFTC's jurisdiction, but allowed the Treasury Secretary to exempt these products from the clearing and trading mandates of the swaps regulation. The treatment of foreign exchange swaps and forwards remained unclear for more than two years after the passage of Dodd-Frank, until the Treasury issued an exemption for such products in November 2012 (U.S. Department of the Treasury, 2012). Foreign exchange products that do not fit neatly into the definition of 'foreign exchange swap' and 'foreign exchange forward', such as non-deliverable forwards and foreign exchange options, however, are treated as 'swaps' and are under the CFTC's jurisdiction.

In creating this complex jurisdictional divide, Congress not only perpetuated the ineffectiveness of its regulatory oversight of financial products, but substantially increased the inefficiency in a manner that does not correspond with the business reality of the swap markets. For example, a business may trade single and broad-based index credit default swap contracts as part of the same strategy. Under Dodd-Frank's regime, jurisdiction over these contracts is divided, without any real economic rationale.

In addition to the cost to market participants of complying with two sets of regulations, described in more detail below, this fragmentation of jurisdiction threatens to repeat the regulatory errors of the past--overregulation in some parts of the market, underregulation in others. For example, since many swaps with securities underlyings, including broad-based securities indices, are under CFTC jurisdiction, effective oversight of the securities markets will necessitate rigorous cross market surveillance. Yet the audit trails of the agencies are not aligned and weakness in cross market surveillance is widely acknowledged. Oversight is unlikely to be as effective as it would be under a single regulator.

Rules

As troubling as the statutory division of swap jurisdiction between the CFTC and SEC is, even more problematic is the magnifying effect of the agencies' rules. For all its 849 pages, the Dodd-Frank Act leaves much of its detail to regulatory rulemaking--398 rulemaking requirements in all--as is appropriate and would be expected in an area as technical as financial regulation. Ninety of these rulemaking requirements, primarily split between the CFTC and SEC, are in Title VII of the Act. (3) In general, the CFTC and SEC are required to adopt rules on the same topics for swaps and security-based swaps, respectively. Both are required to adopt rules for registration of swap dealers and major swap participants, capital and margin, clearing and trading and reporting.

While the Dodd-Frank Act requires coordination between the CFTC and SEC for purposes of regulatory consistency, market participants have been left with two sets of rules that have differed both in their timing and content. While the CFTC has largely completed their rulemaking, issuing rules to meet 35 of 45 Title VII requirements (81%), the SEC has only issued rules to meet 10 of their 29 parallel requirements (34%), a timing mismatch that leaves market participants to build systems to implement the CFTC's rules without knowing whether those systems will also satisfy the SEC's rules for related instruments. (4) Even more problematic, as might be predicted based on the U.S. regulatory history outlined earlier, the CFTC's final rules and the SEC's proposed rules differ substantively in significant ways. Any differences between CFTC and SEC requirements will have a negative impact on the market as swap market participants are required to build both sets of compliance infrastructure. Costs to swap end users also will increase. Two examples, reporting and swap execution facility (SEF) requirements, will be illustrative. The following sections explore the agencies' mandates to write rules in these areas, key differences in their rules as of the date of writing this article and the costs of these differences to swap market participants.

Swap transaction reporting

One of the key goals of the Dodd-Frank Act was to expose the previously dark and opaque swaps market to greater transparency to the regulators and public. Assuming that 'sunlight is the best disinfectant', the Dodd-Frank Act requires that information about all swaps be reported at inception and on an ongoing basis to new market facilities known as 'swap data repositories'. Some of this information must be provided to the public in real time upon execution of the swap. Aside from general directions, however, the statute leaves the details of what information must be reported, by whom, how, when and where to the CFTC and SEC.

Even in a utopia where the CFTC and SEC reporting rules aligned perfectly, setting up the technological and operational infrastructure to comply with swap reporting requirements would be a monumental, and monumentally costly, task. Each firm needs to determine whether they or their counterparty is responsible for reporting information about a given swap. Each reporting party needs to develop systems and policies and procedures to collect the required data elements. The information must be stored and then transferred, through new connections, to swap data repositories that market infrastructure providers must build.

The reality is even more complicated. The CFTC completed its key reporting rules in January 2012. Swap dealers began reporting swap data under these rules on 31 December 2012. The SEC, on the other hand, has not yet completed its reporting rules. As a result, to comply with the CFTC's rules, financial institutions built reporting infrastructure in 2012 without knowing whether that infrastructure would comply with the SEC's rules for securitybased swaps. Significant differences will magnify implementation costs, as it is clearly more difficult to build a system that complies with two sets of requirements than one.

Based on the current state of affairs, it appears unlikely that the systems built for the CFTC's rules will meet the SEC's requirements, as the CFTC final rules and the SEC proposal are far from parallel substantively. First, the CFTC final rule and the SEC proposal differ significantly in the number and type of data elements required (see CFTC, 2012c. See also SEC, 2010). As a result, rather than have been able to build a system that collects the same information for all swap transactions, market participants will need to update the systems created for CFTC products to meet SEC standards. The result is clearly inefficient.

A similar problem arises in determining who has to report this information. Both the CFTC final rule and the SEC proposal generally reflect an understanding that more sophisticated swap market participants that enter into a greater number of swaps will be better able to understand the reporting requirements, build the required infrastructure and bear the cost of reporting. For swaps not traded on a market, the CFTC's reporting rules place the reporting onus first on any swap dealer counterparty, then on any major swap participant counterparty and, only if there is no swap dealer or major swap participant counterparty to a swap (a very unlikely event), on an entity that is not a swap dealer or major swap participant according to specified rules relating to whether the end-user is a U.S. person or is 'financial' in its activities (CFTC, 2012a). The SEC's proposal generally follows the same reporting order with one crucial difference--if one party to the swap is a U.S. person and the other is not, the U.S. person is responsible for reporting (see SEC, 2010. See also CFTC, 2012c). The results are perplexing. For example, if a U.S. corporation enters into an index credit default swap with a London-based swap dealer, the London-based swap dealer is responsible for real-time reporting and the U.S. corporation is responsible for ongoing reporting. If the credit default swap is on a single name instead of an index, however, the U.S. corporation--which likely has no reporting infrastructure or knowledge of its duty to report--is responsible for both real-time and ongoing reporting. While such a corporation is likely to outsource the actual reporting (perhaps to the London-based swap dealer) the need to even consider such reporting is unnecessary, inefficient and points to the difficulty of a bifurcated regulatory regime.

Swap execution facilities

In addition to employing comprehensive reporting requirements, the Dodd-Frank Act seeks to add transparency to the swap marketplace by requiring that standardized swaps be traded on an open exchange or exchange-like facility. In doing so, the drafters sought to end the days when, in their view, swap market participants would call dealers on the phone, get prices that might differ significantly based on their financial might and execute transactions without fostering efficient markets through free transfer of information. As in the prior reporting example, the agencies were granted authority over how this trading requirement would ultimately change the swap markets. Also as in the prior reporting example, the two agencies have taken different approaches to their rules on the subject.

As a statutory matter, the Dodd-Frank Act requires that all swaps and security-based swaps that are required to be cleared be executed on an exchange (a designated contract market under CFTC rules or a securities exchange under SEC rules) or a SEF, as long as one 'makes the swap available for trading'. The statute provides a relatively broad definition of 'swap execution facility':

   a trading system or platform in which multiple participants have
   the ability to execute or trade swaps by accepting bids and offers
   made by multiple participants in the facility or system, through
   any means of interstate commerce, including any trading facility,
   that--(A) facilitates the execution of swaps between persons; and
   (B) is not [an exchange]. (5)


The Act requires the CFTC and SEC to further define the SEF terms, deciding which types of facilities are included or excluded. The statute also enumerates 'core principles' with which SEFs must comply. The CFTC and SEC are required to adopt rules on these core principles, determining how SEFs self-regulate, surveil trades, ensure impartial access to their platform, process trades, report trade information and ensure traded swaps are not readily susceptible to manipulation. This rulemaking authority guarantees that the agencies will play a significant role in determining whether liquid SEF markets will develop through the cost of entering into swaps on SEFs.

Unfortunately, it comes as no surprise that there exists a long list of significant (and potentially costly) ways in which the CFTC and SEC plans for fulfilling these statutory rulemaking requirements diverge. First, the agencies differ in how SEFs must be structured. For example, the CFTC proposal states that any request-for-quote (RFQ) facility--a mechanism through which a liquidity seeker asks a liquidity provider to quote a price for a swap--must require that any RFQ be transmitted to at least five market participants, while the SEC has no such requirement. While the SEC proposes that composite indicative quotes from RFQ responses be made public, the CFTC has no such requirement (see CFTC, 2011a. See also SEC, 2011).

As discussed above, swaps are only required to be traded on an exchange or SEF if one 'makes the swap available for trading'. The Dodd-Frank Act does not define this term or describe how it should be defined. The determination of what constitutes 'made available for trading' will be crucial in the development of the swaps market as it will determine what swaps can still be executed bilaterally, off-exchange. The SEC proposed that it serve as a central decision-maker in determining whether a security-based swap is 'made available for trading'. The CFTC, however, has proposed that SEFs themselves will determine whether a swap is 'made available for trading'. The potential conflicts of interest that may arise have led to significant debate about this key issue among CFTC commissioners.

The CFTC's and SEC's proposals differ in a number of other key ways. The CFTC, but not the SEC, requires that traders pause for 15 s between putting in a customer order and then executing against that with a proprietary or other customer's order. The CFTC, but not the SEC, requires that all RFQ respondents must provide information about resting bids and offers to RFQ requesters when providing quotes, and that the RFQ respondent must 'take [them] into account' (CFTC, 2011b). Importantly, the CFTC and SEC also differ on the delay in public real-time reporting for block trades--large trades with the potential to move the market--with the SEC allowing an 8-26 h delay on notional size but requiring all other information be reported in real time, and the CFTC, in its final rule, allowing a 30 min delay for all information in the first year of compliance and a 15 min delay thereafter (see SEC, 2010. See also CFTC, 2012a).

These differences have the potential to fragment the SEF-traded swap markets. If the final rules remain different, SEFs will need to decide whether to develop systems flexible enough to meet both the CFTC's and SEC's requirements or whether to focus on one asset class or the other. CFTC-specific or SEC-specific SEFs may develop, and market participants will need to become members of and create technological connections to both. Market participants will also incur significant costs in determining how the different trading systems will affect their pricing for swaps. The bottom line is the same as in the reporting context--inefficiencies without benefit.

Timing

Market implementation of the Dodd-Frank Act would have been difficult enough if all swaps were under one regulatory regime with one governing agency adopting rules. The split of authority between the CFTC and SEC, though typical of the complicated U.S. regulatory structure, makes the task herculean. However, the task has been made all but impossible by the radically different timeline on which the CFTC and SEC are proposing and adopting their rules and the fact that, particularly on the CFTC's side, the swap rule proposals have been adopted in an illogical order.

The CFTC and SEC both missed the overwhelming majority of their statutory rulemaking deadlines and have been forced to delay the effectiveness of related Dodd-Frank Act provisions, creating market uncertainty as to when the new regime will be entirely in place. Title VII of Dodd-Frank requires the CFTC and SEC (and, to a much lesser extent, other regulators) to adopt rules satisfying 90 swap-related rulemaking requirements. (2) The vast majority of these were due to be finalized by 16 July 2011. However, as it became clear in spring 2011 that this deadline would be missed for almost all the requirements, the Commissions rushed to identify Dodd-Frank Act swap provisions that would have become automatically effective on 16 July and postponed their effectiveness pending certain key rules.

The fact that the CFTC and SEC missed these rulemaking deadlines is not, by itself, problematic. The 90 swap-related rulemaking requirements that Congress assigned to the Commissions are interrelated and very technical such that the original one-year deadline was unrealistic, particularly in light of severe budgetary constraints on the Commissions. It is, of course, more important for the resulting rulemaking to be well-considered and well-crafted than fast. However, in trying to adopt final rules, the CFTC and SEC have not coordinated the timing of parallel releases, leaving market participants to plan in the face of uncertainty. For example, the CFTC released proposed swap dealer registration rules in November 2010, while the SEC did not release its proposal for registration of security-based swap dealers until October 2011. The CFTC finalized its registration requirements in January 2012, while the SEC has yet to issue a parallel final rule as of the writing of this article (see CFTC, 2012b. See also SEC, 2011). In an even more extreme example, while the CFTC proposed capital and margin rules in April 2011, the SEC did not propose rules until October 2012. (6) Market participants building swap infrastructure have been left to decide which is the lesser of two evils--beginning an infrastructure build-out based on half of the rule set or waiting with the hope that they succeed in a last minute rush to compliance.

The rulemaking progress to date, particularly on the CFTC's side, has also proceeded in a seemingly illogical order, with the most fundamental rules latest in the chain, leaving market participants to guess whether, and how, the proposals might apply to them. Title VII of the Dodd-Frank Act requires the CFTC and SEC to further define 'swap' and 'security-based swap', the financial instruments to which the Dodd-Frank Act reforms apply. Logically, one would have expected the first swap rule proposed to be the one further defining these terms--after all, market participants need to know which products and activities future rules will apply to in order to determine their impact. Yet, remarkably, the CFTC released 49, and the SEC released 12, rules and proposals before approving a joint proposed rule on the swap product definitions on 27 April 2011--more than 9 months after Dodd-Frank was signed into law. (1) Each of these 61 releases referred to the undefined concept of 'swap' or 'security-based swap" By the time the CFTC and SEC released a final rule defining 'swap' and 'security-based swap' on 13 July 2012 (see CFTC/ SEC, 2012), 44 of the 90 Title VII rulemaking requirements had already been met with final rules. (7) As a result of the illogical order in which progress was made, last-minute action was necessary to prevent market chaos surrounding the 12 October 2012 effective date of the CFTC's definition of 'swap', which was scheduled to trigger compliance with many key CFTC rules. The CFTC was forced to issue 18 different forms of relief and interpretation in the days preceding 12 October and late into that evening (Figure 1).

CONCLUSION

The book has not yet been closed on the Dodd-Frank Act's swap regulation. Given that the SEC has lagged behind the CFTC in rulemaking progress, it is still possible that the agencies' rules will converge. Swaps and security-based swaps may be treated the same and the firms who trade in them may be effectively governed by one set, instead of two sets, of rules. Given the agencies' history and the Dodd-Frank rulemaking to date, however, there is little cause for optimism.

Much more likely, unfortunately, is a complex, fragmented regulatory system with different rules for different market participants phased in at different times. Swap costs are bound to increase and regulated entities have protested the regulatory burdens in comment letters and increasingly through litigation. There is always a concern in the United States that if the regulatory arbitrage with other jurisdictions is too great, that business will migrate offshore. This is all quite unfortunate and highlights the potential impact of the missed opportunity under the Dodd-Frank Act to modernize the U.S. regulatory structure.

Acknowledgements

The views expressed in this article are of the authors' and do not reflect the views of Davis Polk & Wardwell LLP. The authors would like to thank Dana Seesel and Alexander Charap for their assistance. This article was previously published in large part in French as Nazareth, A.L. and Rosenberg, G.D. 2012: La Nouvelle Regulation Des Swaps: Une Opportunite Manquee [The New Regulation of Swaps: A Lost Opportunity]. Revue D'Economie Financiere 105: 281-292.

REFERENCES

Benson, JD. 1991: Ending the turf wars: Support for a CFTC/SEC consolidation. Villanova Law Review 36(5): 1175-1218.

CFTC (Commodity Futures Trading Commission). 2011a: Proposed rule, core principles and other requirements for swap execution facilities. 76 Fed. Reg. 1214.

CFTC. 2011b: Proposed rule, core principles and other requirements for swap execution facilities. 76 Fed. Reg. 1214, 1259.

CFTC. 2011c: Proposed rule, capital requirements of swap dealers and major swap participants. 76 Fed. Reg. 27,802.

CFTC. 2011d: Proposed rule, margin requirements for uncleared swaps for swap dealers and major swap participants. 76 Fed. Reg. 23,732.

CFTC. 2012a: Final rule, real-time public reporting of swap transaction data. 77 Fed. Reg. 1182.

CFTC. 2012b: Final rule, registration of swap dealers and major swap participants. 77 Fed. Reg. 2613.

CFTC. 2012c: Final rule, swap data recordkeeping and reporting requirements. 77 Fed. Reg. 2136.

CFTC/SEC. 2012: Final rule, further definition of 'swap: 'security-based swap; and 'security-based swap agreement'; mixed swaps; security-based swap agreement recordkeeping. 77 Fed. Reg. 48,208.

Constantinides, G., Stultz, R. and Harris, M. 2003: Handbook of the economics of finance: Financial markets and asset pricing, Volume 1B. Elsevier B.V.: Amsterdam.

Davis Polk and Wardwell, LLP. 2012: December 2012 Dodd-Frank progress report.

Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010).

Esau, DB. 2002: Joint regulation of single stock futures: Cause or result of regulatory arbitrage and interagency turf wars? Catholic University Law Review 51(1): 917-950.

GAO (Government Accountability Office). 2000: CFTC and SEC: Issues related to the Shad-Johnson jurisdictional accord. GAO: Washington DC.

Guttman, E. 1978: The futures trading act of 1978: The reaffirmation of CFTC-SEC coordinated jurisdiction over security/commodities. American University Law Review 28(1): 1-35.

House Financial Services Committee Democrats. 2012: Frank and Capuano introduce legislation to merge the SEC and CFTC, http://democrats.financialservices.house.gov/press/PRArticle.aspx? NewsID = 1498.

Johnson, PM and Hazen, TL. 2004: Derivatives regulation. Aspen Publishers: Frederick, MD.

Markham, JW. 1991: Federal regulation of margin in the commodity futures industry--History and theory. Temple Law Review 64(1): 59-143.

Nazareth, AL. 2009: Testimony concerning the harmonization of futures and securities regulation at the joint public meeting of the CFFC and SEC, http://www.sec.gov/comments/4-588/4588-16.pdf.

Schneider, H and Schapiro, ML. 1990: What corporate lawyers should know about commodity futures law. In: Pitt, HL, Nathan, CM and Volk, SR (eds). 21st Annual Institute on Securities Regulation. Practising Law Institute: New York.

SEC (Securities and Exchange Commission). 2010: Proposed rule, regulation SBSR--Reporting and dissemination of security-based swap information. 75 Fed. Reg. 75,208.

SEC. 2011: Proposed rule, registration and regulation of security-based swap execution facilities. 76 Fed. Reg. 10,948.

SEC. 2012: Proposed rule, capital, margin, and segregation requirements for security-based swap dealers and major security-based swap participants and capital requirements for broker-dealers. 77. Fed. Reg. 70,214.

U.S. Department of the Treasury. 2008: Blueprint for a modernized financial regulatory structure, http://www.treasury.gov/press-center/press-releases/Documents/Blueprint.pdf.

U.S. Department of the Treasury. 2009: Financial regulatory reform: A new foundation, http://www.treasury.gov/initiatives/Documents/FinalReport_web.pdf.

U.S. Department of the Treasury. 2012: Determination of foreign exchange swaps and foreign exchange forwards under the commodity exchange act. 77 Fed. Reg. 69,694.

(1) See the Davis Polk Regulatory Tracker.

(2) For additional useful background, see Markham (1991). See also Johnson and Hazen (2004). See also Schneider and Schapiro (1990).

(3) See Davis Polk Dodd-Frank Progress Reports. http://www.davispolk.com/Dodd-Frank-Rulemaking-Progress-Report/.

(4) See December 2012 Davis Polk Dodd-Frank Progress Report.

(5) Dodd-Frank Act [section] 721.

(6) See CFTC (2011c). See also CFTC (2011d). See also SEC (2012).

(7) See Davis Polk Dodd-Frank Two-Year Anniversary Progress Report. http://www.davispolk.com/Dodd-Frank-Rulemaking-Progress-Report/.

ANNETTE L NAZARETH (1) & GABRIEL D ROSENBERG (2)

(1) Davis Polk & Wardwell LLP, 901 15th Street NW, Washington DC 20005, USA.

(2) Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, NY 10017, USA.
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Title Annotation:Symposium Article; financial regulations
Author:Nazareth, Annette L.; Rosenberg, Gabriel D.
Publication:Comparative Economic Studies
Article Type:Essay
Geographic Code:1USA
Date:Sep 1, 2013
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