WASHINGTON, April 11, 2011 /PRNewswire-USNewswire/ -- Hal S. Scott, Director of the independent Committee on Capital Markets Regulation and Nomura Professor and Director of the Program on International Financial Systems at Harvard Law School, is scheduled to testify before a Congressional panel on Wednesday. Professor Scott is expected to warn that the Commodity Futures Trading Commission and the Securities and Exchange Commission need to make major changes in the approach and coordination in their ongoing work to frame the new rules required under Dodd-Frank to better regulate the derivatives market.
The CFTC is nearly done proposing rules that will dramatically transform the derivatives market, yet it never released a comprehensive plan for the dozens of rules it wrote. "This has frustrated the comments process for these new rules," Scott says. It should develop a comprehensive plan now, before the rules become final, and should invite public comment on the overall plan, as well as seek the approval of the Federal Reserve to make sure the new rules adequately prevent systemic risk. Moreover, he is concerned that so far both the SEC and CFTC have failed to fully analyze the costs and benefits of the proposed rules or to appropriately coordinate with each other and with foreign regulators, particularly in the European Union.
Without a thorough review of the CFTC's approach to the rulemaking process, including public comment, rigorous cost-benefits analysis of alternative rules and close coordination, "we can expect gaps and inconsistent or contradictory global rules that can hinder U.S. economic recovery and trigger a major migration of derivatives trading from U.S. markets," Scott believes.
Professor Scott's scheduled testimony is before The House Agriculture Committee's Subcommittee on General Farm Commodities and Risk Management this Wednesday, April 13, at The Capitol in Washington.
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SOURCE Committee on Capital Markets Regulation