During his opening statement July 22 on a hearing concerning the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), Rep. Barney Frank (D-Massachusetts), chairman of the House Financial Services Committee, admitted that if Congress was “starting from scratch we wouldn’t have two separate agencies, but we do have two separate ones and there’s no point in trying to merge them.” Thus, he said, the SEC and CFTC “will work closely together.”
The heads of both the SEC and the CFTC pledged that they are already working closely together to fill gaps in the financial regulatory framework, specifically on how to share oversight of the over-the-counter (OTC) derivatives market and harmonizing areas where both agencies share joint regulatory authority.
Gary Gensler, chairman of the CFTC, testified that the SEC and CFTC will be holding joint public hearings in August and September to further discuss harmonization of the agencies’ rules. Both agencies are also doing a “gap analysis,” Gensler said, to determine the location of gaps in regulation. Both agencies have a deadline of September 30 to send a joint report to Congress detailing their recommendations for harmonizing the agencies.
Gensler told members of the Committee that he believes the most effective way to oversee the OTC derivatives market is to have two regimes: one that oversees derivatives dealers and the other that oversees the market function. “We must enact both of these regimes,” he said. Gensler said that “the unregulated derivatives dealers allowed for more leverage in the system.”