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Challenges Facing the U.S. Capital Markets to Effectively Implement Title VII of the Dodd-Frank Act

January 10, 2013
Committee Remark

Thank you, Mr. Chairman, for holding this important hearing this morning.
Under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Congress responded to one key cause of the 2008 financial crisis - the unregulated over-the-counter (OTC) derivatives market.  Through the Act, the Congress tasked the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) with bringing much-needed transparency to this market, which amplified the collapse of the housing bubble and cascaded losses across the global financial system.
The CFTC and the SEC are now in the process of implementing what the Congress has tasked them with, both through regulation of firms at the entity-level and with regulation at the transaction-level, including clearing, data reporting, margin, trade execution and business conduct standards.
Once in place, these rules will bring much needed stability to the financial system, while also lowering costs to the end-users that rely on these products to run their businesses.
With that said, our hearing today will begin to get into the details with regard to some of the rulemakings the CFTC and SEC are now conducting, particularly with regard to how swaps regulation will extend across U.S. borders.  On this point, I think it is important that we be sure not to import unregulated risk back to the United States, while also recognizing some of the legitimate concerns raised by market participants, including:
• A lack of harmonization between the SEC and CFTC;
• Challenges raised by the faster implementation timeline in the U.S. relative to the European Union and Asia, as well as a lack of global harmonization; and
• A lack of clarity regarding implementation dates.
In addition to exploring these concerns, I look forward to hearing comments from stakeholders related to a number of other issues related to Title VII and its implementation. 

I hope we all can agree on the broad goals and structure of Title VII, which will strengthen our financial system, even as we continue to debate the implementation details of some of these reforms.
Thank you, Mr. Chairman, I yield back.