The CFTC Market Intelligence Branch ("MIB") of the Division of Market Oversight, briefed the CFTC Energy and Environmental Market Advisory Committee ("EEMAC") on recent developments in the derivatives market. The MIB concluded that "the derivatives markets appear resilient in the face of lower liquidity and historic volatility and volume," and that "economic threats remain elevated."
The MIB stated that the velocity of the COVID-19 market sell-off represents one of the most extreme in equity markets in the past century. Further, the MIB stated that futures and swaps liquidity has declined in the current market, and that spreads have generally widened.
CFTC Chair Heath Tarbert commended the "resilience" that the derivatives market has shown during this period of "unprecedented turbulence." Commissioner Dan Berkovitz emphasized how crucial a reliable supply of energy is to the United States' infrastructure and economy, noting the importance of the derivatives markets being able to "fulfill their central purpose" of price discovery and risk management. Commissioner Dawn Stump emphasized the CFTC's obligation to "preserve the integrity" of market resources needed to produce, distribute, and consume energy, especially during heightened market volatility.
The CFTC Division of Swap Dealer and Intermediary Oversight issued no-action relief to provide CFTC-registered CPOs with additional time to comply with reporting requirements in light of the challenges posed by COVID-19.
The CFTC Division of Swap Dealer and Intermediary Oversight granted time-limited no-action relief to a bank from "major swap participant" status.
The CFTC Division of Market Oversight and Division of Swap Dealer and Intermediary Oversight issued a series of no-action letters to registrants as COVID-19 continues to pose compliance challenges.