CFTC Chair Massad Discusses Rulemaking Priorities, Including Dealer Registration, Margin and HFT

CFTC Chair Timothy Massad delivered remarks before the Global Exchange and Brokerage Conference. He spoke about the next steps to be taken in certain Dodd-Frank rulemaking initiatives, as well as the CFTC's policy perspectives regarding high-frequency trading ("HFT").

According to Chair Massad, one of the most important priorities regarding the general oversight of major market players will be to look at the swap dealer de minimis threshold. He explained that the CFTC must take data-driven action "well in advance" of the December 2017 date, when the threshold for determining who is a swap dealer will decline from $8 billion to $3 billion under current swap dealer rules. Chair Massad also reported that the CFTC is prioritizing the finalization of its proposal on margin requirements for uncleared swaps, and is working closely with banking regulators on the rule.

With regard to reporting, Chair Massad stated, the CFTC intends to revise its rules to clarify reporting obligations. He said that he expects the CFTC to propose initial changes later this summer to the swap reporting rules for cleared swaps that are designed to clarify reporting obligations and improve the quality and usability of the data in swap data repositories. Chair Massad also highlighted the need to ensure international cooperation and transparency regarding reporting.

Additionally, Chair Massad explained, the CFTC has been considering taking steps to improve the swaps trading framework by focusing on operational issues and acting in a number of areas, including ways to "make it easier" to execute package trades and correct error trades, as well as to simplify trade confirmations and reporting obligations. He also said that the CFTC is examining other issues pertaining to SEF trading, and is planning to hold a public roundtable on the made-available-for-trade determination process.

Chair Massad concluded by considering how the CFTC should respond to the increase in high-frequency trading from a policy perspective. Although the CFTC has not made any decisions, he said, it is considering a number of policy changes, including: (i) whether the successors to typical floor traders, or proprietary traders with direct electronic access to a trading venue, should be subject to a registration requirement if they engage in algorithmic trading, (ii) the adequacy of risk controls, particularly pre-trade controls, (iii) standards for the development and monitoring of algorithmic trading systems, and (iv) who should be responsible for implementing trading controls.

See: Chair Massad's Speech.