The SEC and the Commodity Futures Trading Commission on Friday issued a report recommending 20 steps to expand their oversight over exchanges to bolster the nation's financial system, including some that would require congressional action.
The two agencies worked on the report to better coordinate their oversight of securities and futures markets and close loopholes that played a role in the financial crisis.
"Our agencies rose above the usual challenges and came together to offer meaningful recommendations to improve our oversight of the financial markets," CFTC Chairman Gary Gensler said in a statement. "Now we must continue to work together to implement these recommendations and work with Congress to secure necessary changes in statute to best protect the American public."
The report calls on Congress to pass legislation that would clarify each agency's authority over products exempted by the other. It would also outline how to settle jurisdictional disputes within a firm timeline.
Congress is working on those issues as part of a revamp of the nation's financial regulatory structure. The Obama administration and a House Financial Services bill would propose joint rulemaking between the agencies for most swaps and give power to the Treasury Department to resolve any rulemaking dispute.
The draft by the House Agriculture Committee, which holds its markup next week, would take a different path: The SEC would take the lead on rulemaking for security-based swaps, while the CFTC would have authority over the other types of swaps.
As for turf disputes, under the Agriculture bill either agency could initiate a challenge in the U.S. Court of Appeals for the District of Columbia.
The report calls for legislation to give more power to the CFTC over rules for exchanges and clearinghouses under the Commodity Exchange Act, as well as require foreign boards of trade to register with the CFTC.
Separately, in a conference call on Friday, Gensler said the agencies do not have legislative language for the changes they want Congress to enact, but he added the Obama administration wants those changes made as part of the financial services reform process. Gensler also noted that if the two agencies cannot agree on whether to approve a financial product, they have proposed a process under which Congress would decide.
Gensler said the House Financial Services bill "covers appropriate goals," but that he wants to "bring more people" under it.
But the bill came under fire Friday by Sen. Maria Cantwell, D-Wash., who said on MSNBC that the measure "has so many loopholes that the loophole actually eats the rule." She also argued that "50 to 90 percent of derivatives could still be off exchange."
The bill tells "end users like equity firms, like hedge funds, 'You don't have to play by the rules,'" she said. "The Treasury Department should be ashamed of themselves. They have blessed this deal."
Treasury officials have gone back on the Obama administration's proposals, added Cantwell, a longtime critic of the futures and derivatives industry and a member of the Senate Finance Committee.