CFTC Weighing Revamp of Swaps Trading Rules, Chairman Says

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By Phyllis Diamond

The CFTC is considering revising its rules governing swap trading platforms to be more principles-based and less “prescriptive and inflexible,” Chairman J. Christopher Giancarlo said Nov. 13.

The Commodity Futures Trading Commission should have followed the clear intent of the Dodd-Frank Act, allowing so-called swap execution facilities to decide their own business models, and enhancing professionalism through licensing, testing, and industry codes of conduct, he said in an address to an industry gathering in Singapore.

It’s not too late to take those steps, Giancarlo told the ISDA Regulators and Industry Forum. “We are currently considering just such action.” Giancarlo didn’t provide a timeline for rulemaking, saying more information would be available “in the coming year.”

The CFTC chair also said his agency is continuing to refine its program of multi-CCP—central clearing party—stress testing. CCPs, as swaps clearinghouses are known, stand between the two sides of a derivatives deal and hold collateral from both in case a member defaults. Multi-CCP stress testing involves a common stress event affecting multiple CCPs.

According to Giancarlo, the CFTC will seek input from other regulators—especially the Federal Reserve Board, which supervises two systemically important financial market utilities, or SIFMUs, whose failure could threaten the stability of the U.S. financial system.

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