By Christopher Doering and Sarah N. Lynch
WASHINGTON (Reuters) - Wall Street banks and major market players said they are equipped to comply with derivatives reforms, but accused U.S. regulators of dragging their feet on clarifying how and when they will go into effect.
Regulators have released dozens of proposals to reform the swaps markets but bankers, exchange executives and traders said they need a timetable for implementation.
They have argued that sloppy rules could reduce market liquidity, push more trading to unregulated markets, and ultimately lead to higher prices for consumers.
At the start of a two-day roundtable held by the U.S. Commodity and Futures Trading Commission and the Securities and Exchange Commission to design a road map for when the reforms will be rolled out, the industry said timelines are essential and regulators are not doing enough to allow them to prepare.
"It's all about when we jump off the bridge together, the sooner the better," said Christopher Edmonds, a president of Ice Trust, part of IntercontinentalExchange, who added that at some point they will have to make a decision to allocate resources to be able to comply with the new rules.
"While we all have compliant operations today, the question is: can we be compliant tomorrow?" he said.
Regulators have said they will use a so-called phase-in approach to the new rules, which are being crafted as part of last year's Dodd-Frank law that gave them oversight of the roughly $600 trillion over-the-counter derivatives market.
The CFTC is considering a phase-in approach that would weigh many factors in determining when entities must comply. This could include giving market participants who are not used to strict regulatory oversight more time to comply.
Robert Cook, the SEC's trading and markets division director, said his agency does not "have a fixed timeframe in mind." He said he hopes the roundtable will help develop a "reasonable timeframe" that implements the rules in the "quickest but most practical, cost-effective way."
The roundtable comes as the CFTC and SEC find themselves nearing a mid-July timetable to implement new financial reform legislation -- a deadline they have acknowledged they will miss. The roundtable included dozens of industry representatives including officials from Morgan Stanley, CME Group, and Bank of America Merrill Lynch.
Daniel Maguire with LCH.Clearnet said these rules are "gamechanging" and said a phase-in approach is best. "We have a patchwork quilt that we need to get through," he said.
Market players voiced concern about what the first phase should be. Lee Olesky, the CEO of Tradeweb, which is majority- owned by Thomson Reuters, said registration could be a first step toward implementation.
"We think market participants will gain from having that certainty as to who the SEFs are and who the central counterparties are," Olesky said about swap execution facilities, where cleared swaps will trade.
At least one CFTC official has said regulators are not doing enough to work with the industry.
"When are we going to show them this? Are we just going to continue to roll this out and they're going to have to read it in piecemeal. Why don't we give them the full picture?" asked Republican CFTC Commissioner Scott O'Malia on Friday. Previously, O'Malia worked for Mirant Corp on corporate risk management and energy trading among wholesale power producers.
During the rule-making process, the futures agency has been hounded by the industry as well as by lawmakers and some of its own commissioners over its frenetic pace.
Republican lawmakers have proposed a bill to delay implementation of rules involving derivatives by 18 months.
There are signs regulators are beginning to heed the call. Just last week, the CFTC said it was reopening the comment period for most of the rules it has already proposed for as much as 30 days.
(Reporting by Christopher Doering and Sarah N. Lynch; Editing by David Gregorio and Tim Dobbyn)
