CFTC Commissioner Giancarlo Calls for Progress on Swaps Trading Rules
Commentary by Steven Lofchie
CFTC Commissioner J. Christopher Giancarlo revisited his own six-month-old white paper analyzing the CFTC's swaps trading regulatory framework. He provided a progress report on the issue.
The Commissioner's white paper focused on eight areas including: (i) limitations on the permitted methods of execution, (ii) procedures regarding block transactions, (iii) the made-available-to-trade process, (iv) the void ab initio policy for swaps not accepted for clearing, (v) the process for providing confirmations of uncleared swaps, (vi) the embargo rule, (vii) the Core Principles to which swap execution facilities ("SEFs") are subject and (viii) the imposition of qualification standards on SEF personnel.
Since the release of the white paper, CFTC staff initiated certain "small efforts" to improve the rules. However, the Commissioner asserted, the CFTC's actions to date have "fallen short overall" in implementing the changes needed to truly improve swaps trading. Regarding seven of the eight areas in which he said that the SEF rules should be improved, the Commissioner stated that the CFTC had made "no progress" or "little progress." He sounded a more positive note regarding block trading – an area in which, he said, the CFTC had made "some progress."
Commentary
The CFTC SEF trading rules did not receive substantial support from either the buy side or the sell side. Whether or not one agrees with the specific recommendations made by Commissioner Giancarlo, it is difficult to see the logic of the CFTC's continuing defense of market structures and trading rules that few participants favor and that do not contribute to market stability in any way. Significant credit should go to the Commissioner for his persistence in compelling the CFTC to revisit these flawed rules.