By Douwe Miedema
WASHINGTON (Reuters) - Prominent Republicans in the House of Representatives on Friday threw their weight behind industry complaints that the nation's derivatives regulator is confusing markets as it rushes through a plethora of new rules.
Frank Lucas, who chairs the House Agriculture Committee, said the way the Commodity Futures Trading Commission issued additional guidance on one of its rules this week was "irresponsible," and that it raised legal questions.
On Thursday, the CFTC closed a loophole banks had used to avoid new rules requiring them to trade derivatives on newly established trading platforms set up after the 2008 financial crisis to make the market less opaque.
But the fact that the document was issued as a "staff advisory" by an agency division - and not an official decision by the leaders of the agency - was questionable, said Lucas, whose committee oversees the CFTC.
The CFTC did not return a request for comment.
U.S. Representative Jeb Hensarling, the Republican head of the House Financial Services Committee, also came out with a statement criticizing the decision by the agency, which was appointed as U.S. watchdog of the $630 trillion swaps market after the crisis.
The lucrative derivatives industry, which was at the core of the financial crisis, is dominated by large Wall Street banks including Bank of America Corp, JP Morgan Chase & Co and Citigroup Inc.
The Republican-held House has passed a number of changes to the 2010 Dodd-Frank Wall Street reform act, but these are mere token victories for banks because they stand little chance of making it through the Senate.
The CFTC's staff guidance made clear that banks cannot avoid the new rules for the trading platforms by having trades brokered in New York, but then booking them in London or other financial centers abroad, lawyers said.
CFTC Chairman Gary Gensler, himself a former Goldman Sachs banker, is aggressively rushing through a raft of rules to reform markets before his term runs out at the end of this year, which has sometimes riled investment banks.
(Editing by Matthew Lewis)