03.15.2018
By Rob Daly

CFTC Plans Return to Normality

Delivering the keynote at the Futures Industry Association’s annual conference in Boca Raton, Florida, CFTC Chairman Christopher Giancarlo informed the industry that regulator has returned to regular practices and operations after rolling out the Dodd-Frank Act’s various mandates.

Christopher Giancarlo, CFTC

“This includes greater care and precision in rule drafting, more thorough econometric analysis, less contracted time frames for public comment, and a reduced docket of new rules and regulations,” he said.

In the year to come, the CFTC will continue to work in conjunction with other US financial regulators to address aspects of the Supplemental Leverage Ratio that inhibit greater clearing of derivatives.

“The October 2017 Department of the Treasury report on capital markets thoughtfully addressed these concerns,” said Giancarlo. “Specifically, the current SLR definition of total exposure is not reflective of a clearing member’s true exposure to swaps. We will work hard with other financial and prudential regulators to form a consensus around appropriate adjustments to the SLR.”

Giancarlo would like the full Commission to complete the final rules on the de minimis levels for swap dealer registration by year.

“Oversight have now presented my fellow Commissioners and me with current swap-dealing data and analysis and are now addressing follow-up questions,” he said. “I am hopeful that the data will enable the Commission to reach a consensus on an appropriate de minimis level.”

The CFTC will attempt to develop a final version of position limit rule, but there is a lot of work to be done.

“There are hundreds of comment letters on the topic, and there are opinions on all sides of the issue, including by American agriculture producers,” he noted. “Based on public comments, it is clear that the Commission has not yet gotten it right.”

Giancarlo also plans to revisit Regulation AT, which has been a personal sore spot for him.

A new version of the regulation does not need to be entirely made from scratch as he is open to considering some elements of Reg AT could serve as a basis of a new and efficient rule.

“Our new Market Intelligence Branch and Office of Chief Economist will provide critical market analysis of the role of algorithmic trading,” said Giancarlo. “In February, the FCA and the Prudential Regulatory Authority published papers outlining their respective regulatory governance and compliance expectations in respect of algorithmic trading. There is a growing body of data and analysis for us to draw upon. Yet the goal must be an effective rule, not just any rule.”

In other regulatory areas, Giancarlo reminded the audience that the CFTC is an independent agency, which is not bound entirely by executive orders, such as President Trump’s order on “Enforcing the Regulatory Reform Agenda.” Nonetheless, the regulator established its Project Kiss initiative approximately a year ago to work with the public to identify where regulations could be “simpler, more coherent, and understandable.”

The regulator expects to have a series of “Kissable” rule improvement throughout the year to come, he added.

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