CFTC Advisory Committee Recommends Market Structure Changes

The CFTC Global Markets Advisory Committee ("GMAC") advanced eight recommendations to promote access and competition in the U.S. Treasury markets, repo and funding markets and commodity markets.

The GMAC’s Global Market Structure Subcommittee (GMSS) prepared four recommendations:

• GMSS Recommendation 1 – New Block and Cap Sizes
  • GMSS recommended delaying the CFTC's new block and cap sizes applicable to trade reporting, currently scheduled to become effective December 4, 2024, to allow for more engagement with market participants in an effort to tailor these sizes to current market conditions and mitigate potential liquidity and cost impacts.
• GMSS Recommendation 2 – Proposal to Add CCPs as Permitted Counterparties
  • GMSS recommended aligning SEC and CFTC regulations by permitting a CCP that meets the definition of a "covered clearing agency" under SEC Rule 17-Ad-22(a)(5), to be designated a "permitted counterparty" pursuant to CFTC Rule 1.25(d)(2).
• GMSS Recommendation 3 – FICC-CME Customer Position Cross-Margining Structure
  • GMSS recommended extending cross-margining benefits between futures and repos to more sophisticated customers.
• GMSS Recommendation 4 – Endorsement of Futures Industry Association (FIA) Volatility Controls Mechanism Paper
  • ​​​​​​​GMSS recommended the CFTC use best practices as a tool for understanding exchange market risk controls and when engaging with global regulators and international standard setters.

The GMAC’s Technical Issues Subcommittee (TIS) prepared four additional recommendations:

• TIS Recommendation 1 - Global Default Simulation
  • ​​​​​​​TIS recommended the CFTC utilize best practices for insight into exchange market risk controls and interactions with global regulators and standard setters.
• TIS Recommendation 2 – MMFs as Eligible Collateral
  • ​​​​​​​​​​​​​​TIS supported a CFTC proposed amendment to lift the asset transfer restriction on money market funds used as collateral, but recommended alignment with international standards and reciprocal regulatory adjustments in the U.S. and EU to facilitate broader use of MMFs in non-cleared margin transactions.
• TIS Recommendation 3 – Improve Trade Reporting for Market Oversight, Streamline Potential 40% Increase in CFTC Reportable Data Elements
  • ​​​​​​​TIS criticized the CFTC's proposal to add nearly 50 new reportable fields to the existing 128 in swap data reporting and recommended steps to improve data reporting elements.
• TIS Recommendation 4 – Improve Trade Reporting for Market Oversight and Improving Data Sharing and Systemic Risk Analysis
  • ​​​​​​​TIS recommended the CFTC engage with key regulators to address data sharing through discussions and establishing a Memoranda of Understanding (MOU) with G20 regulators to increase global trade reporting.