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Change Overview and Rationale

SEC Chief Sees Reg Reform and Consumer Protection as One Goal

by | Wednesday, September 19, 2012 | , ,

Despite the legislation’s two-part name, “The Wall Street Reform and Consumer Protection Act,” SEC Chairman Mary L. Schapiro understands financial regulatory reform and consumer protection to be one thing, not two separate goals. In her October 26, 2012 remarks at George Washington University, Chairman Schapiro states that she sees Dodd-Frank, though still a work in a progress, as founded on some very simple guiding principles that benefit all market participants in the long run and are the basis for both sound regulation and consumer protection. According to Schapiro, these principles are:

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SEC Puts the Brakes on Money Market Reforms

by | Thursday, August 23, 2012 | , ,

In an August 22, 2012 statement SEC Chair Mary Schapiro announced that the much anticipated money market reforms she has championed have hit a wall. It had been expected that the Commission would consider next week options for further reform like a free floating NAV, rather than a firm $1 NAV, perhaps a capital buffer, and a redemption restrictions. Schapiro announced that “because three Commissioners have now stated that they will not support the proposal and that it therefore cannot be published for public comment, there is no longer a need to formally call the matter to a vote at a public Commission meeting.”

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Money Market Reforms: Have We Done Enough Already?

by | Sunday, August 19, 2012 | , ,

Ever since the Reserve Primary Fund “broke the buck” in 2008, regulatory reform of money market funds (MMFs) has been an area of intense debate. Following the financial crisis and given the important and pervasive role played by MMFs in the US and global economies, regulators embarked on a two-step process of reforming the regulation of MMFs. In 2010, the SEC approved new regulations intended to address credit quality, liquidity, maturity, and transparency concerns. Since that time, the SEC, legislators, the Fed, and market participants have vigorously debated “step two,” further regulatory measures aimed at reducing the risk of a run on MMFs and providing a cushion against losses. Are these further reforms necessary? Or have we done enough already?

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Basel and IOSCO Float Margin Requirements for Non-centrally-cleared Derivatives

by | Tuesday, July 24, 2012 | , ,

The Basel Committee on Banking Supervision and the International Organization of Securities Commissions (IOSCO) jointly have published a consultative paper on margin requirements for non-centrally-cleared derivatives. The paper presents the initial policy proposals emerging from the Basel Committee and IOSCO joint Working Group on Margining Requirements.

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Is Money Market Fund Reform Just Regulatory Overkill?

by | Sunday, July 22, 2012 | , ,

Already subject to a comprehensive regulatory regime, amendments in 2010 to the rules governing money market funds tightened regulation even further to make money funds more resilient to certain short-term market risks, and to provide greater protections for investors in a money market fund threatening to “break the buck.” More recently, however, Federal Reserve officials and some members of the Financial Stability Oversight Council have said money market funds are subject to runs, a source of systemic risk, and part of a shadow banking system that sorely needs even more regulation. In response, Melanie L. Fein, former senior legal counsel to the Board of Governors of the Federal Reserve System has published a paper describing why further changes to the money market regulatory regime are unwarranted overkill.

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Wallison on Shadow Banking: If It Isn’t Broken, Don’t Fix It

by | Thursday, June 21, 2012 | ,

In a piece published June 14, Peter J. Wallison, Fellow at the American Enterprise Institute, argues against imposing any new regulation on shadow banking markets and firms without without convincing proof they need it. According to Wallison, the calls from regulators and others for additional regulation of so-called “shadow banks” are simply a rush to judgment.

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OTC Derivatives Reform: A ‘Sea of Change’?

by | Tuesday, June 19, 2012 | , , ,

OTC derivatives legislation and clearing reforms understandably have European and US market participants scratching their heads about what this “sea of change” has in store for them and the future of OTC markets. David Felsenthal, a partner at Clifford Chance LLP, has given the matter some serious thought, and provides some guidance in his January 14, 2012 post at Harvard Law School’s Forum on Corporate Governance and Financial Regulation.

According to Felsenthal, the reforms being considered focus primarily on transparency about on positions and exposures of individual firms in OTC derivatives, a transparency sorely missing during the financial crisis.

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As Deadline Looms G20 Urges Action on OTC Derivatives

by | Tuesday, June 19, 2012 | , ,

In their communiqué from June’s Los Cabos meeting, the G20 said that it expects member nations to finalize their OTC derivatives regulations in order to meet the the G20’s fast approaching deadline. The communiqué urges member nations to fast track their legislative and regulatory policy processes so that by the end of 2012 all standardized OTC derivative contracts are traded on exchanges or electronic trading platforms (as appropriate) and cleared through central counterparties. In addition, the G20’s committment calls for OTC derivative contracts to be reported to trade repositories, and non-centrally cleared contracts to be subject to higher capital requirements by the end of 2012 as well.

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“What Good are your MMF Rules?,” U.S. Congress asks SEC.

by | Tuesday, June 19, 2012 | , ,

Per the fiscal year 2013 Financial Services and General Government Appropriations bill of the House Appropriations Committee, the SEC must perform an in-depth study on the effectiveness of the Commission’s long standing rules, as well as the more recent money market regulatory reforms. In particular, Congress wants to know whether these rules help in providing liquidity to the capital and municipal markets and to what extent they promote and enhance money market fund stability, resiliency, and transparency. This proposed legislation just adds to the ongoing discussion among US regulators, Congressional leaders, and international oversight bodies on the systematic risks still posed by money market funds.

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