CME chief, eyeing Europe, says Dodd-Frank was best thing for markets

NEW YORK (Reuters) – U.S. regulations enacted after the financial crisis will likely be revisited and watered down but not eliminated in their entirety, in part because they give much-needed clarity to market participants, the head of CME Group (CME.O) said on Tuesday.

The sweeping 2010 Dodd-Frank Wall Street Reform law had a chilling effect on some areas of the U.S. market, as its authors intended, and critics say it is overly restrictive and should be eliminated.

But given the current uncertainty in Europe surrounding the Markets in Financial Instruments Directive, or MiFID-II, which takes effect next year, U.S. lawmakers were right to move quickly with Dodd-Frank, CME Chief Executive Officer Terrence Duffy said at a Barclays financial services conference.

“When you look in hindsight, it’s probably the best thing that ever happened to us because we have to get clarity for the marketplace,” Duffy said.

CME said in April it would shutter its money-losing UK-based derivatives exchange and clearing house because its customers preferred to trade and clear in the United States, with access to more products and liquidity.

“We’ve closed down those facilities so we will save those compliance costs on MiFID-II and we feel very confident that this is something that will benefit the United States and our marketplace from a global standpoint,” Duffy said.

Going forward, it is likely the “spirit” of Dodd-Frank will be reinterpreted and softened by regulators, including the Securities and Exchange Commission and the Commodity Futures Trading Commission, under the new U.S. administration, he said.

Duffy pointed to rules around hedging exemptions and anticipatory hedging needs as areas he would like to see loosened up and which would help the exchange operator’s energy and agricultural futures businesses.

He also said he thinks the Volcker Act, which prohibits most proprietary trading by banks, is “is going to go away.”

But a full repeal of Dodd-Frank is doubtful, he said.

“I don’t think there is a political will to eliminate regulation, whether you like it or not, that had something to do with one of the worst crises in financial history.”

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