The Trump administration on Friday urged the overhaul of key rules underpinning trading in U.S. stock, bond and derivatives markets, calling on regulators to loosen dozens of restrictions imposed on Wall Street after the financial crisis.
The 220-page report written by the Treasury Department lays out a series of recommendations for the Securities and Exchange Commission and the Commodity Futures Trading Commission. Rather than making specific demands, the document is intended to be a road map for the agencies to streamline regulations affecting the largest banks, hedge funds and exchanges.
While some of the changes would require congressional action, most could be accomplished by re-writing regulations. The markets review was spurred by President Donald Trump’s February executive order calling for a broad rethink of financial regulations. Treasury issued a separate report on bank oversight reforms in June, and another on asset managers is set to be released in the coming days.
“The review has identified a wide range of measures that could promote economic growth and vibrant financial markets,” the report said.
A number of the suggestions in the markets study have long been backed by industry, and groups like the U.S. Chamber of Commerce were quick to praise them. Meanwhile, Democratic lawmakers and investor advocates are expected to oppose many of the recommendations. They’ve been critical of the Republican administration’s attempts to cut Wall Street regulations, especially those enacted in response to the financial crisis.
The administration’s wish list isn’t likely to be granted any time soon. The regulatory process is notoriously slow and neither the SEC nor the CFTC have a full compliment of commissioners.
Treasury’s recommendations included proposed adjustments to rules stemming from two laws that tightened capital markets oversight, the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010. Two Trump appointees, SEC Chairman Jay Clayton and CFTC Chairman Chris Giancarlo, will be charged with carrying out many of the proposals.
Both agencies saw their oversight roles expanded by Dodd-Frank, with the CFTC being given responsibility for policing the massive over-the-counter derivatives market. The two chairmen appointed by Trump are aligned with the administration’s goal of dialing back some of those rules.
Clayton told lawmakers in March that he thought Dodd-Frank regulations should be reviewed to determine “whether they are achieving their objectives effectively.” And he has repeatedly said that he wants to stem a two-decade decline in the number of publicly traded U.S. companies -- a subject the Treasury report will address. Giancarlo reached out to the derivatives industry earlier this year for suggestions on how the CFTC could simplify and modernize agency rules that he said can be “unnecessarily complex.”
In particular, the Treasury recommended that the CFTC and SEC work better together, especially in monitoring derivatives markets. The report echoed calls by Giancarlo for a loosening of restrictions around the execution of swaps trades. It also backed an effort by Giancarlo to harmonize swaps data reporting.
“We are pleased to see our perspective incorporated in the final product,” Giancarlo said in a statement.
Craig Phillips, a former BlackRock Inc. executive who was major fundraiser for Hillary Clinton’s presidential campaign, has been leading the Treasury’s regulatory review. He is now a senior adviser to Secretary Steven Mnuchin.