CFTC Chair Reaffirms Support for Cross-Border Deference on Clearinghouse Regulation

CFTC Chair J. Christopher Giancarlo reaffirmed his commitment to a cross-border deference-based approach to clearinghouse regulation, encouraged expanded Congressional oversight over virtual currencies, and provided updates on several rulemaking initiatives.

In testimony before the U.S. House Committee on Agriculture (the "Committee"), Mr. Giancarlo reaffirmed the importance of honoring the 2016 equivalence agreement between the U.S. and the European Union ("EU") on derivatives clearinghouse supervision. He emphasized the importance of a deference-based clearinghouse supervisory framework, and thanked Committee members for supporting his efforts. Mr. Giancarlo expressed concern that EU members will adopt European Commission-proposed legislation overhauling the EU supervisory framework, and suggested that the EU is attempting to use Brexit as justification for violating the equivalence agreement. He rejected this reasoning. He called for continuing the current deference-based approach which will not result in "collateral damage" to U.S. markets, in order to protect U.S. entities from being subjected to additional regulatory and supervisory burdens. Mr. Giancarlo expressed hope that further cooperation with EU authorities will lead to a stronger, more effective cross-border deference-based global framework.

Mr. Giancarlo reiterated earlier testimony on distributed ledger technology ("DLT") and virtual currencies, noting the significant potential of DLT-related advancements. He cautioned that virtual currencies receive outsized media attention considering their relatively small market capitalization, but acknowledged that they present complex issues for regulators. He touched on the vastly differing perspectives that different market participants have on virtual currencies, and said that the CFTC's work in this area has six key elements: staff competency, consumer education, interagency cooperation, the exercise of authority, strong enforcement, and the heightened review of currency product self-certifications. Mr. Giancarlo reminded the committee that the CFTC does not have authority over spot markets. He suggested that Congress should consider an expansion of oversight over virtual currencies.

Mr. Giancarlo highlighted CFTC efforts to improve swap data reporting rules. He also outlined the recently unveiled "entity netted notionals" method for more accurately measuring size and risk of interest rate swaps markets. On the de minimis threshold, which he previously announced would be extended through the end of 2019, Mr. Giancarlo shared that the Division of Swap Dealer and Intermediary Oversight has analyzed swap dealer trading data through the end of 2017, and that the analysis will be used to evaluate the threshold. He also expressed support for a new position limits rule, and said that it should be developed by a full five-member CFTC.

Premium Content

Available only to Premium subscribers.

 

Tags