CFTC Commissioner Mark P. Wetjen's Speech at the Annual ISDA North American Conference

Commissioner Wetjen addressed the following issues in his speech at the ISDA Conference:

• Implementation Phase: Generally regarding the swap regulatory regime, including rules relating to business-conduct standards, reporting, documentation, risk-management practices, and definitional rules;
• Guiding Principles for the Dodd-Frank Rules with particular focus on Cross-Border Guidance: Asserting that the CFTC needs to provide clarity, should take a measured approach to rulemaking, and must have workable rules;
• The Importance of Standardization: Noting that standardization facilitates clearing, promotes transparency, and improves the comparability of pricing information to the benefit of end-users and risk managers.

Lofchie Comment: Commissioner Wetjen's speech is a useful read on regulatory policy, including the various tensions that regulators face in determining whether and what rules to adopt. That said, the substance of his remarks, which are a defense of the CFTC's actions to date, should be open to debate. Among the areas in which I think it is possible to disagree with Commissioner Wetjen's conclusions are (i) whether the CFTC's rules have been narrowed with a view to making them consistent with its resources (how can the CFTC really regulate foreign banks, I wonder); (ii) whether adequate time is being given to allow new registrants and end-users to come into compliance with the new rules; (iii) whether the rules are sufficiently clear (for example, whether the definition of the term "swap" is too reliant on tests of "facts and circumstances" that are inherently unclear); and (iv) whether the largest worry in cross border regulation is that something may slip through a gap (or whether the larger worry is how many entities will be subject to multiple schemes of potentially inconsistent regulations).Although I would personally disagree with many of Commissioner Wetjen's conclusions, I do think that he is asking many of the important questions, and doing so in a manner that reflects an invitation to dialogue rather than to a beheading.

View speech in full here(links externally to CFTC website).