transparency and lower competition in the marketplace. as long as we handle margin and many end-user issues, which we want to work with you on, transparency, competitions, and markets. >> mr. shapiro, i agree that failed regulation caused a lot of jobs. how can better regulation cause a loss of jobs? can you discuss a little bit how better regulation can save jobs? >> effective regulation can promote capital formation, which is the creation of jobs. when companies feel they can go to the market and raise capital, stocks will be priced fairly. investors will have the opportunity to invest in their company and sell stock when there want to. it enables companies to raise the money necessary to create jobs. when investors have confidence in the soundness of our institutions. -- institutions, they have more success. there are studies that show they have intelligent regulation. it can actually lower the cost of capital for industry. >> i would say with respect to this study to which you alluded, it acknowledged that what it did was a quick and dirty economic assessment. the office of the survey and study did not have access to the data they need to give a more sophisticated response. they said, based on our survey, here is what we think our relative level of utilization of derivatives is. we have to multiplying that by a margin requirement, which we think might be imposed. that gives us -- >> i am sorry. you're saying there is not a scientific study? >> they were not being misleading. they said, we are going on the basis of the survey and extrapolating. we don't have the data. the most important point to make is that they were assuming that there would be margin requirements applicable to these and users surveyed. what you have heard is that will not be the case. >> so, can you tell us how effective regulation of the derivatives market can actually help to save jobs? >> yes. from our point -- point of you again, which is one of systemic risk and containing a, the keys are always watching for leverage and transparency. with the absence of transparency, you have an effectively operate in markets. -- ineffectively operating markets. you can have collapses of institutions and markets. i think a well-honed, well- conceived regulatory system in the financial sector is one designed to allow the allocation of capital to its most productive users. >> of river witnesses believe effective regulation of the derivatives market can actually save jobs. is that correct? >> yes. >> yes. of course, "effective" is what everybody will be discussing. >> thank you very much. i yield back. >> thank you. mr. gensler, as to the application of the cftc proposed rules to foreign counter parties and to foreign dealers, i was going to ask you about a concern here over regulatory arbitrage and over the fact that they will wait this out. new policies year. we see more derivatives' business go to europe. we have american financial companies severely disadvantaged vis-a-vis foreign competitors. i mentioned in my opening statement that in the long run, onerous rules that are necessary will, without doubt, dr capital to non-u.s. markets. you have testified here that you are in contact with regulators in europe. you expect them to follow the american approach. but, how do you have those concrete assurances? do we have a memorandum of understanding with european regulators? tell me how you assure us of that fact. >> we are working very closely, all three of our agencies, with the europeans and asians regulators. we share our pre-proposal documents, memos, and drafts with them. i think, depending upon budgets, i will be back in europe in march in front of the european parliament, possibly. we are working closely. i'm optimistic their proposals are on clearing the end-user approach. they are a little bit behind us, a little later than us. >> they are going to be later. i don't know where brazil and toronto and singapore are going to be here. i think is going to be very hard to try to convince us that american firms are not going to lose business to competitors when that is happening now. let me ask another question. that has to do with the fact -- dino the fcc and the cftc, and you say they are trying desperately to get this collaborative environment. on the most important roles, you are failing to get that kind of collaboration between the agencies. the differences in the derivatives markets you oversee are virtually nonexistent. there is a lot of overlap there in products and users. the fact is that you insist on producing two very different sets of regulations here. if this is the end result, and users and investors will not be better off. it will be a boon for foreign companies. i will give you a few in terms of what is discussed in the business press. real time reporting. the agencies have different rules for the definition of what "real time" means. they have a broad trade definition, the number of data fields that must be reported as different. which entity is cast with submitting information to the public, all different. we have the blog trade definition. the fcc asked for further public comment and will likely embraced different definitions. the cftc has offered a rich should -- rigid approach. we have the swap execution facility roles, where the cftc requires sending a request for a quote to at least five providers. the fcc allows the customers to determine that. it is different in every case. i would like your comment on that as well, if you could. >> i am happy to comment on that. we are working very closely together. many more things are the same than are different. >> i picked out some of 50 that have been pointed out. >> we are still at the proposal stage. there is lots of opportunity through our extensive meetings with industry and others to bring these rules closer. when we propose something that is different, we asked people what would be a better approach. is the cftc's approach veteran more realistic? is there a third way to go about dealing with this? i would also say there are differences in the markets we are regulating. the security data -- security- based markets trade differently than the interest rate markets. to some extent, the differences in the marketplace will dictate -- let me please agree with you that where the rules will fall upon institutions that are contracting and working in both markets, it is incumbent upon us to make them as close to identical as possible so institutions are not put under the burden of two sets of rules. where the rules go to differences in the way borders might interact, there might be justification for slightly different rules because of the nature of products being traded. >> thank you. mr. chairman, i have questions for the record on position limits, meant to curtail speculation, but could end up pitting long-term passive investors. i will put that in the record and get the response from the witnesses. thank you. >> thank you. ms. malone? >> thank you, mr. chairman. i think the panelists for their public service and testimony today. in the continuing resolution, there was on the floor this week a drastic cut in funds them of the president requested for the sec and cftc. our republican colleagues have proposed that the fcc budget and cftc budget be cut to 2008 levels. that is the level and the year that the economy cratered and fell. i can hardly imagine that any of my colleagues are pleased with the level of oversight that was performed by our regulatory agencies in 2008. cutting them even more than what they have then, i feel, will make it impossible for them to implement dodd-frank and be responsible regulators. according to the ig of the fcc, the proposal would force the agency -- they could cut roughly 600 in staff. is that correct? >> i believe that is correct. i think the budget president obama -- budget proposal has not put the fcc all the way back to 2008 levels. it does represent a cut off continuing resolution number. >> to put it in perspective, the loss of household wealth as a result of this great recession has been estimated to be approximately $14 trillion. the over-the-counter derivatives market is a volume that about $600 trillion -- is estimated that about $600 trillion. the infamous flash crash on may 6 temporarily wiped out over $1 trillion. it seems to me penny wise and pound foolish not to invest in the agency's that are required to come forward with the new rules, the new study, and to prevent the madoffs of the future. dodd-frank calls for 95 new rules for the sec. is that correct? >> it depends on how you count it. yes. >> 61 from the cftc. right? >> we think it is more on the order 45. i don't know. people count different ways. >> how many studies? one bill has 60. how many studies do you have to do? >> more than 20 studies and to create five new offices within the agency. >> how will you do that with the reduced budget? can you hire the people to oversee the derivatives and everything you have to do? >> no. we will not be able to operational lies the rules we are promulgating and ultimately adopting under that budget scenario. if we were able to hire people, we can get them. we are getting amazing talent in the securities and exchange commission at this time. we are under a hiring restriction right now. >> the staff has been excellent under this uncertainty. they are doing terrific work. working with the sec and the public, we will continue writing rules. in 2012, we will not be able to oversee the markets and ensure transparency. if we were taken back to 2008 levels, then we would be in a different circumstance. we are in a unique circumstance where we were crawling back to where we were in the 1990's. taking us back to 2008 would have to entail significant reductions in force. >> the derivatives market is now you that $600 trillion. in 2010, the budget for the cftc was $169 million. as my colleagues call for more oversight and accountability, we certainly need to give the tools to the oversight agencies to get the job done. i hope my colleagues on both sides of the aisle will support appropriate funding for the cftc and sec. there has been talk of us not being competitive and abroad. my colleague said we have a disadvantage. capital requirements are the same. is that correct? our requirements are not higher. >> that is correct. >> we are on an even playing field on capital requirements. the leverage requirements, are we on an equal playing field? >> yes. we agreed upon a were leverage ratio. yes. >> do you believe our markets are disadvantaged? it did not appear to work in 2008. >> yes. with respect to capital, we have been able to standardize across the committee. there are still discussions going on about the standards applicable to central counter parties as such. >> thank you. >> mine -- my time is expired. >> thank you, mr. chairman. the first court rejiggers question is for chairman -- the first question is for chairman gensler. the cftc is looking at setting position limits at swap data. my concern is, i ask this of you and i ask it of secretary geithner in 2009, was there announces that looked at the critical unnecessary data recording this? i am concerned that multiple exchanges have raised concerns that without this critical data, the very -- they will in properly set limits, which will impact liquidity and price risk hedging. it seems you're putting the horse before the cart if you don't have the data that is so important. my concern is not only here, but there is talk of some dealers looking at moving abroad. we will lose those jobs. could you comment on that? >> the proposal the commission put out in january is consistent with the congressional provision that we put something out with regard to the physical commodities, metals, energies, and agriculture. they're working with position limits. most of these are for the spotting, but also looking at the other ones. it really would be a -- three steps to this, proposal phase -- we have passed the public for comment. we will be well-informed. final rules will not be taken into consideration until we get comments. we had 82 comments on an earlier limit. no doubt we will get a lot of public input. we changed the proposal based on those earlier comments. we will probably change the final. the third phase is getting data from the market when the swap data repositories are stood up. we anticipate that will take some time. >> that will be crucial in how you set those limits. there won't be something done before? >> the proposal says that even once it is a final rule, it would not be implemented until there is data on which to apply a formula. limits have historically been done on a formula of the total size of the market, how big is the market. >> my concern is that we are going to have some of these traders that are going to go abroad because they cannot wait with all the comments, and then to set that later on. it seems you're putting the cart before the horse in not having the data before you have set those limits. >> again, congress asked us to put proposals out. we are soliciting comments. it is one that is important to get the comments on these physical commodity markets. we have had limits in agricultural markets for a decade spent -- for decades. we look forward to public comment. it does in the proposal it would not going to affect until they are based on the actual statistics of the size of the futures market and swaps market. >> maybe congress was wrong in the way it designated it should be done. let me go on to another question. chairman shapiro, the department of labor has proposed a new definition of fiduciary, which would significantly modify 35 years of established law defining who is an investor advice fiduciary. investment advisers provide personal investment advice about securities to customers. these proposals will be setting standards for retype -- retail ira's. have they consulted on these proposals? could something come out differently? >> you are right. we published our investment adviser brokered deal and fiduciary study several weeks ago. we were clear to say it does not implicate the fiduciary standard under arisa. the recently proposed to expand the definition. that has the potential to affect on going remain -- arrangements between broker dealers and there are at -- ira clients. we are prepared to work with the department of labour. we have offered any information or expertise we can provide about the regulation of broker- dealers in the context of advising those accounts. we will continue to reach out to them. >> you have been in contact with them? >> yes. >> yield back. >> i would like to use my time here to zero in on the part of this i had the most involvement .n, the section 733, i will ask a couple questions about the proposed regulations that cover that section. it seems to me that one of the great accomplishments of dodd- frank was to pull derivatives trading out of the shadows and into the sunlight, requiring standardized swaps to be traded on swap execution facilities or exchanges that create pre-trade price transparency. section 733 even includes a rule of construction and directs the sec and cftc to update rules to require the use of the best technology available for creating pre-trade price transparency. we were intentional in not asking for flexibility for swap dealers when swap dealers have flexibility before dodd-frank, they chose the least transparent method of trading, which was telephone calls. instead, congress said that swap execution facilities must have -- must give multiple participants the ability to trade swaps by accepting bids and offers made by other participants using the best technology for pre-trade price transparency. chairman, it seems to me that your draft rule comes pretty close to doing what we were trying to get to. am i correct that you require a swap execution facility to include a central trading screen where everyone can see everyone else's prices? am i clear that you are not going to allow swap dealers to trade only on some corner of the platform where one participant asks for quotes that only he or she can trade, and that dealers will have to put their prices on the central trading screen? am i correct that that is what you intend? >> it is correct the proposal brings transparency, that facilities have to allow any participant to put a live bid or offer. everybody can see that. no one will be required to do it. there is no market-maker obligation. if you want to, you get a choice. the end users would have a choice if they did not want to put a firm offer. they could use a request. >> let me go to chairman schapiro. your proposal differs and has not taken congress' directive as seriously as the cftc is. you are allowing security-based swap execution facilities. i am quoting from your proposal. "it would enable every participant to choose to send a single request for a quote to a single liquidity provider." it seems to me not to be what we are trying to get to hear. are you all interpreting these things differently? are you setting up a situation here where you are going to have the potential for a race to the bottom with the two agencies potentially interpreting this thing different for setting up a different set of rules in enabling participants to argue that the lowest common denominator or to be in play here? >> i don't think so. we are taking a very seriously. we have taken a slightly different approach, in part dictated by the securities from market, swaps on single issue words, -- issuers are quite different. we thought this takes a different approach in our proposal. it is just a proposal. we would not permit single dealer platforms. we would redefine it. the quote-requesting party must be able to send a single request to our participants on the trading platform. the party also seeks to limit the number of participants to home there -- to whome their quote goes to. >> where the proposals lineup is full of them say that you must allow any market participant, even of you were not in congress and you set up to be a market participant, you could make a live bid, a live offer, put your risk, and compete. markets are best when there are -- when they are transparent and there is competition. we are looking for public comment to see if they should be synch up. >> the subcommittee chair. >> i think the chair. when you think of the rules that have already come out and the regulations proposed, and the paperwork that has come mount with these -- , how -- come out, i can only hazard a guess at what we would be looking at right now if they had the money they asked for. the tick away from this hearing is from the other side of the aisle, the solution to the problems is to spend more money on it. that takes away from this side of -- the take away from this side of the aisle, we want to get it right as far as the rules and regulations. if you look at past history and you compare that to what we're doing today, those roles coming out of 80 pages. we are looking at 1000 pages. that one took four to six months. there, they did it for 15 months. it took three years to roll them all out and get into implementation. we are compressing this into a much shorter time and a larger area of the environment, where we will ask the industry to come up with a new architecture structure, build new technology systems we don't have yet, creating new operational process, a new legal documentation process, creation of clearing houses, connectivity between mes. all of that was not there. you are trying to do it now in an extremely expedited manner. if we do it in the time you're talking about now, won't this lead to a sending of the remark it overseas? won't it create unshared advantages between the big players and the very small players who cannot keep up with what you are trying to do? >> we have asked, in beat -- in the midst of these raw makings, to hear