WASHINGTON — The House Financial Services Committee on Wednesday passed a trio of bills that seek to change how derivatives are regulated under the Dodd-Frank Act.
Taken together, the measures are poised to reopen the debate over some of the tough questions that Congress wrestled with when it decided to better regulate derivatives in 2010. Though all three bills were sponsored by Republicans, they attracted significant support from Democrats on Wednesday.
A bill sponsored by Rep. Scott Garrett, R-N.J., would prevent regulators from requiring that swap execution facilities, which function much like clearinghouses, have a minimum number of participants, among other changes.
"This bill will ensure that one of the most egregious examples of regulatory over-reach in implementing Dodd-Frank does not become a reality, and thus, a drag on American job creation," Garrett said in a statement after the vote. "I was encouraged to see so many of my colleagues across the aisle join us in support of this important bill."
Garrett's bill was framed much differently by Americans for Financial Reform, a group that is defending Dodd-Frank's reforms. The group opposed all three bills that were approved Wednesday, but it singled out Garrett's bill as particularly damaging, saying that it would allow big derivatives dealers to avoid transparency and fair price competition.
"Financial exchanges have thrived for centuries by encouraging transparency and competition," Americans for Financial Reform wrote in a letter to members of Congress. "Banning any requirement for public, open price competition on derivatives exchanges is a significant blow against Dodd-Frank derivatives reforms and market fairness."
A second bill sponsored by Rep. Michael Grimm, R-N.Y., would exempt so-called end users from margin requirements on swaps that do not go through a clearinghouse. The exemption does not apply to banks or other financial entities.
"My legislation removes the margin requirements on true end-users in order to free up capital to be used for job creation and to help our companies remain competitive in the global economy," Grimm said in a press release.
A third bill, sponsored by Rep. Steve Stivers, R-Ohio, seeks to exempt swaps traded between different affiliates of the same financial institution from some of Dodd-Frank's requirements.
"This bill will help businesses manage risk, while ensuring the safety of these transactions as well as keeping this business in America," Stivers said in a press release.