ABSTRACT
The Dodd-Frank Act amended the federal securities laws and repealed a residue of the Enron loophole, in order to authorize the Securities and Exchange Commission (SEC) substantively to regulate securities-based swaps. The Dodd-Frank Act requires the SEC to hire an independent consultant to report on the effect of high-frequency trading and other technological advances on the market. It opened that door with a provision requiring the SEC and CFTC to conduct a study on the feasibility of requiring the derivatives industry to have standardized computer-readable algorithmic descriptions of derivative products. The SEC made little use of that provision before the financial crisis of 2008, but became active in pursuing such cases when credit default swaps became the target of criticism. The growth of the credit default swaps market had been phenomenal. The Treasury Department proposed legislation in June 2009 to impose margin requirements for OTC derivatives and otherwise broaden SEC and Commodity Futures Trading Commission (CFTC) regulation of those instruments.
