Senate Agriculture panel holding hearing on derivatives rules

Top U.S. regulators are heading to Capitol Hill later this week to discuss the implementation of rules on the multitrillion-dollar over-the-counter derivatives market. 

Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), and Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro, charged with writing new rules for swaps, will testify Thursday, along with market participants before the Senate Agriculture, Nutrition and Forestry Committee.

Under the Dodd-Frank Wall Street reform law, the CFTC and SEC are charged with writing new regulations for the swaps market after largely unregulated trades contributed to the financial crisis in 2008, leading to a bailout of some of the nation's largest firms. 

The financial regulatory overhaul aims to reduce risk by having clearinghouses guarantee most swaps and trading them on exchanges. The over-the-counter derivatives market is estimated at $583 trillion.

Gensler has previously told lawmakers that with the threat of budget cuts he doesn't have the funding to enforce new derivatives regulations required under Dodd-Frank. He has requested an increase to $261 million from $169 million for fiscal 2011. 

House Republicans are aiming to cut billions from the current year's budget, and are focusing on holding back funding for the financial regulation overhaul while they discuss other avenues. 

The agency is aiming to complete the writing of the new rules in July, and has urged enough funding to hire more staff and upgrade technology to achieve enforcement of standards for banks, hedge funds and large swap users.

Last month, Rep. Scott Garrett (R-N.J.), the second in seniority on the House Budget Committee, said increases in the budgets of the SEC and CFTC would only further the idea that spending can solve the nation's problems. 

Meanwhile, Gensler has argued that better regulations would lower the risks of the system and provide more liquidity. 

Other witnesses include Jill Harlan, corporate risk manager, Caterpillar; Terrence Duffy, executive chairman, CME Group Inc.; Donald Donahue, chairman and chief executive, Depository Trust and Clearing Corporation; Steven Bunkin, managing director and associate general counsel, Goldman Sachs; Michael Greenberger, professor and director, Center for Health and Homeland Security, University of Maryland School of Law.