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October 4, 2011 

The Honorable Gary Gensler 

Chairman 

U.S. Commodity Futures Trading Commission 

1155 21st Street, NW 

Washington, DC 20581 

The Honorable Ben S. Bernanke 

Chairman of the Board of Governors 

Federal Reserve System 

200 1 C Street, NW 

Washington, DC 20001 

The Honorable Mary L. Schapiro 

Chairman 

U.S. Securities and Exchange Commission 

100 F Street, NE 

Washington, DC 20549 

The Honorable Martin 1. Gruenberg 

Acting Chairman 

Federal Deposit Insurance Corporation 

550 17th Street, NW 

Washington, DC 20429 

Dear Chairmen Gensler, Schapiro, Bernanke and Acting Chairman Gruenberg: 

As authors of the Wall Street Reform and Consumer Protection Act (P.L. 111-203) (Wall Street 

Reform Act), we commend your work implementing Title VII of this important new law. We 

have an enormous opportunity to set a new global standard for the operation of an efficient, 

transparent and well-regulated derivatives market. It is in a spirit of support for your efforts that 

we write with suggestions for how to avoid some unintended consequences that could undermine 

this objective. 

As you know, the existing $600 trillion derivatives market operates as an integrated global 

market, despite the jurisdictional determinations made in Title VII between the Commodity 

Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). It is 

our hope that the two agencies will work closely and collaboratively together and that the new 

swap regulations can be sequenced and implemented in a logical, coordinated manner that 

encourages compliance and market competition. 

Given the global nature ofthis market, U.S. regulators should avoid creating opportunities for 

international regulatory arbitrage that could increase systemic risk and reduce the 

competitiveness ofU.S. firms abroad. Congress generally limited the territorial scope of Title 

VII to activities within the United States. This general rule should not be swallowed by the law's 

exceptions, which call for extraterritorial application only when particular international activities 

of U.S. firms have a direct and significant connection with or effect on U.S. commerce, or are 

designed to evade U.S. rules. We are concerned that the proposed imposition of margin 

requirements, in addition to provisions related to clearing, trading, registration, and the treatment 

of foreign subsidiaries of U.S. institutions, all raise questions about consistency with 

Congressional intent regarding Title VII. 

PAINTED ON RECYCLED PAPER 
Moreover, U.S. regulators should work with other international regulators to seek broad 

harmoni:Lation of appropriately tough and effective standards. This can be accomplished by an 

appropriate staging of the adoption or implementation of our rules abroad. Should current 

harmonization efforts ultimately fail or prove a race to the bottom that would undermine 

effective regulation, the U.S. would of course reserve the right to proceed to extend the 

application of its standards to overseas operations. 

In addition, as you proceed through the rule-making process, we urge you to respect Congress' 

intent to protect the ability of end users and pension plans to use swaps in a cost-effective 

manner. In particular, Congress recognized the need to allow pension funds, states, 

municipalities and other "special entities" to continue to use swaps by expressly rejecting the 

imposition of a fiduciary duty for swap dealers that is legally incompatible with their legitimate 

role as market-makers. The withdrawal ofthe Department of Labor's rules on a fiduciary duty 

under ERISA gives the agencies an opportunity to work together to prevent such adverse results. 

We urge you to work to revise the proposed rules in a way that avoids unintended consequences. 

As one of the first countries to propose new financial rules following the 2008 crisis, the world is 

closely watching what we do. As you revise and finalize the proposed rules, we look forward to 

working together to support your important work in a way that keeps our financial markets the 

envy of the world. 

25'~ Senator Ti son ~~ Chairma 

U.S. Senate Committee on 

Banking, Housing, and Urban Affairs 

Sincerely, 

Ranking 

Co Member 7£:L U.S. House Committee on 

Financial Services 

cc: The Hon. Timothy Geithner, Secretary, U.S. Department of the Treasury 

The Hon. Hilda Solis, Secretary, U.S. Department of Labor 

The Hon. John Walsh, Acting Comptroller of the Currency 

The Hon. Edward DeMarco, Acting Director, Federal Housing Finance Agency 

The Hon. Leland A. Strom, Chairman and CEO, Farm Credit Administration