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Dodd-Frank 30 Day Countdown: Day 30

Insight Robin Powers Robin Powers · June 16, 2011

A Dodd-Frank Overview

According to the U.S. Securities and Exchange Commission (SEC), “Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) addresses the gap in U.S. financial regulation of OTC swaps by providing a comprehensive framework for the regulation of the OTC swaps markets.” Dodd-Frank goes into effect July 16, 2011 (360 days after it was passed), with the SEC and the Commodity Futures Trading Commission (CFTC) promulgating and implementing the supporting rules and regulations.

However, with hundreds of these new derivative rules yet to be finalized (or that still need to be drafted) in D.C., the SEC voted itself a six month delay. Just five days later, the CFTC followed the same approach and also voted to delay their deadline. Unfortunately, there are several provisions of Dodd-Frank that will automatically go into effect on July 16. The new delay means that investors and the financial market as a whole will be left with a hiatus between the automatic provisions in effect and the supporting rules that have yet to be created. The uncertainty that will plague the derivatives market until the end of December (or whenever the rules are finalized) and the unintended consequences that could result from this disparity appear to go against the intent of Congress in creating this bill in the first place. So much for a “comprehensive framework.”

Tomorrow:  Now what? Concerns facing the OTC derivatives market in the absence of a workable regulatory structure.

http://online.wsj.com/article/SB10001424052702303848104576385372663523158.html?mod=googlenews_wsj

- Stephanie Kane co-authored this post