FIA calls on lawmakers to rethink clearing house ownership rules

FIA calls on lawmakers to rethink clearing house ownership rules

The Futures Industry Association has urged the Commodity Futures Trading Commission and the Securities and Exchange Commission to withdraw or defer acting on rules to limit ownership of clearing houses and swap execution facilities.

In October, the CFTC proposed a 20% ownership limit for banks and swap dealers in a bid to ensure they do not hold undue influence on the clearing houses and trading platforms they use.

In addition, major market participants would not be allowed to collectively own more than 40% of a clearing house under the proposals, which are designed to improve oversight of the $615 trillion OTC market.

In a comment letter sent to regulators last week, FIA wrote that "the adoption of ownership restrictions - and, in particular, the 40% aggregate ownership restrictions that have been proposed for clearing houses - are likely to have unintended and undesirable consequences".

The futures industry lobby group stated that restrictions on ownership of clearing houses and SEFs are "inappropriate, at least at this time" and noted that the Dodd-Frank Act does not specifically mandate such limits.

On governance issues, FIA says it supports aspects of the CFTC/SEC proposals that would require at least 35% of the board of directors of a clearing house or SEF be public directors, but highlighted the risks of requiring that risk management committees be comprised largely of outside directors.

"FIA is concerned that public directors and customer representatives, who can provide meaningful knowledge and insight when serving on the board of a DCO or SEF, will typically lack the specialised knowledge and hands-on experience with margin and other risk systems," FIA wrote.

Read the full letter:Download the document now 807.7 kb (PDF File)

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