CFTC GMAC Considers G20 OTC Derivatives Reforms

At a Global Markets Advisory Committee ("GMAC") meeting, the CFTC considered presentations on the current status of the "four pillars" of the 2009 G20 directive on the OTC derivatives market. These include (i) trading on exchanges or electronic trading platforms, (ii) clearing through central counterparties, (iii) margin requirements for non-centrally cleared derivatives and (iv) data reporting to trade repositories.

CFTC Commissioner Dawn Stump reminded advisory committee members of the objectives of the GMAC including helping the CFTC to determine how it can avoid burdensome regulatory and operational impediments to global business while preserving protections for customers and other market participants.

CFTC Chair J. Christopher Giancarlo asserted that market fragmentation (i) exacerbates the challenge in swaps trading, (ii) increases market fragility and (iii) increases firms' operational risks as they "structure themselves to avoid the rules of one jurisdiction and be subject to the rules of another" while overseeing several liquidity pools in many jurisdictions.

CFTC Commissioner Rostin Behnam emphasized that, in addressing the current regulatory framework, regulators should not forget the lessons of the financial crisis.