New York financial firms would move jobs overseas if the U.S. grants the industry's request to exempt companies' foreign branches from some Dodd-Frank Act rules, said Gary Gensler, chairman of the Commodity Futures Trading Commission.
"If we accept their approach — that they say, 'No, don't cover their London branches' — the jobs will go overseas, but the risk will be back here," Gensler said today in an interview on Bloomberg Television.
JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) are among U.S. firms to argue that applying Dodd-Frank rules to their overseas branches or subsidiaries would threaten their ability to compete with foreign-based rivals. Imposing the law's margin requirements on non-U.S. swaps would "eviscerate our ability to serve clients overseas and cede the global market," JPMorgan Associate General Counsel Don Thompson said at a House hearing Feb. 8.
The CFTC is set to propose guidance on June 21 on how the U.S. may govern the international reach of Dodd-Frank rules on derivatives, people familiar with the plan have said.
The CFTC also is planning an order providing overseas-based swap dealers and some affiliates of U.S. banks as much as a year to comply with all of Dodd-Frank regulations, Gensler said in a speech prepared for an Institute of International Bankers' conference in New York. The delay may affect compliance with capital and some risk management regulations, Gensler said.
Overseas swap dealers would still be required to register with the CFTC and report trades to swap data repositories, Gensler said. The CFTC is seeking to have a system for allowing compliance with overseas regulations substitute for Dodd-Frank rules.
Regulators are also seeking to complete rules this year for exchange trading.
"We need to bring the same transparency to the swaps market that has existed for decades in the securities and futures market," Gensler said in the interview today. "That means that end users can see the bids and the offers, and it broadens competition."