CTFC Chief Says Banks May Help Hedge Funds Avoid Clearing Rule

Feb 19 2013 | 9:02am ET

The head of the Commodity Futures Trading Commission is concerned that banks may be helping hedge funds skirt new clearing rules designed to reduce market risk.

Chairman Gary Gensler made his worries clear in prepared testimony for a congressional hearing on the Dodd-Frank financial regulation reform law. The rule, requiring trades to be guaranteed at central clearinghouses, is to go into effect next month. But Gensler said U.S. banks may be helping U.S.-based but offshore-domiciled funds to avoid that requirement by routing trades to overseas offices.

"The CFTC is working to ensure that this idea does not prevail and develop into a practice that leaves the American public at risk," Gensler said.

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