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CFTC Chair Heath Tarbert Sets Strategic Priorities for 2019

At the 35th Annual FIA Expo, CFTC Chair Heath P. Tarbert described five strategic goals for the CFTC and outlined action plans for each goal.

Goal: To "strengthen the resilience and integrity of . . . [the] derivatives markets while fostering their vibrancy."

Mr. Tarbert stated that the CFTC will enhance:

  • Central Counterparty supervision by (ii) improving the Division of Clearing and Risk and (ii) finalizing amendments to CFTC Rule 39 ("Derivatives Clearing Organizations");

  • international cooperation by (i) deferring to non-U.S. regulators, if deference is granted in return, (ii) facilitating an open dialogue with the European Commission and European Securities and Markets Authority (or "ESMA"), (iii) introducing a cross-border swaps proposal and (iv) applying fraud and manipulation standards as to U.S. activity (see previous coverage);

  • margin and capital regulation by (i) examining margin models to ensure that enough margin is in the system, (ii) publishing a swap dealer capital rule proposal and (iii) assessing the impact of the Basel rules on the markets; and

  • market structure by proposing, for example, a restriction on the name-give-up practice that will not harm liquidity.

Goal: To "regulate . . . [the] derivatives markets to promote the interests of all Americans."

Mr. Tarbert said, the CFTC will:

  • focus more on the agriculture sector, calling it the "cornerstone" of the Commodity Exchange Act;

  • propose a position limits rule that will provide "prophylactic, clear, and usable" limits on market participants while ensuring that "bona fide" hedging is not restricted;

  • treat Main Street institutions according to their needs, as opposed to the needs of Wall Street institutions; and

  • increase customer protection by amending CFTC Rule 160 and Rule 190 to codify bankruptcy standards.

Goal: To "encourage market innovation and enhance the regulatory experience for market participants at home and abroad."

Mr. Tarbert urged:

  • a renewal of the agency's principles-based regulation where appropriate;

  • SEC-CFTC coordination, to ensure that the agencies are not "duplicating" related regulations;

  • the elimination of rules that do not have a "current regulatory purpose"; and

  • the development of a principles-based approach that allows the United States to lead in the innovation of "21st-century" commodity products (e.g., digital assets).

Goal: To "be tough on those who break the rules."

Mr. Tarbert said the CFTC will:

  • focus on "getting people to follow the rules" rather than solely on punishing them;

  • reduce fines for those who self-report, cooperate and remediate; and

  • coordinate with other agencies (e.g., the DOJ, FBI and SEC).

Goal: To "focus on . . . [the CFTC's] unique mission and improve[] . . . operational effectiveness."

Mr. Tarbert called for:

  • cost-effectiveness concerning budget and funds allocation;

  • increasing "diverse" talent; and

  • protecting American intellectual property by enhancing data analysis and protection.

In addition, Mr. Tarbert announced that the CFTC "will restrict no-action letters to those instances where we need a temporary fix or there's something very specific that doesn't lend itself to a general rule."

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