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Our Views

Our Views Columns

Date: 4/4/2019

Title: Public Meetings, Brexit Discussions Cap Busy Week at CFTC

Traders, industry groups, and other stakeholders converged on the Commodity Futures Trading Commission (CFTC) last week, considering a wide range of topics from automation to opening markets. Check out the details below.

On Monday the CFTC Commissioners took action on two important regulatory matters, with the ongoing issue of Brexit taking center stage.  

  • Post-Brexit margin requirements: All Commissioners recognized the potential for Brexit to cause chaotic market activity and expressed their commitment to providing as much certainty as possible. As a first step, the Commissioners unanimously agreed to an interim rule designed to give market participants some relief if a Brexit deal is not reached between the European Union and the United Kingdom (UK). The interim rule exempts market participants from the CFTC’s uncleared margin requirements for legacy swaps transferred to counterparties outside of the UK.
  • De minimis exception for Insured Depository Institutions: The Commissioners granted a de minimis exception for swaps entered into by Insured Depository Institutions (IDIs). The majority of Commissioners argued in favor, noting that the change would assist small and mid-size IDIs by improving their ability to serve commercial clients. The minority Commissioners agreed that change was needed, but had concerns with the rule at the time of the vote.

On Wednesday the CFTC’s Technology Advisory Committee met to examine the impacts of new trading technology on the industry. During the meeting, the CFTC’s Division of Market Oversight discussed their most recent research report on the consequences of automated trading on the markets. The report reviewed six years of market data and studied the relationship between automation and volatility, finding no correlation between the volatility of end-of-day prices and the level of automation.

Finally, the CFTC unanimously approved two final rule amendments to simplify registration requirements for market participants. Both rules came out of CFTC Chairman Giancarlo’s “Keep It Simple Stupid” (KISS) Innovative, which he launched to reduce unnecessarily complex and burdensome rules. The rule changes offer flexibility for market participants on items such as margin for swap dealers and oversight reporting for self-regulatory organizations.

NCBA remains highly supportive of the Commission’s current activities and applauds the CFTC for proactively addressing the concerns of market participants, particularly livestock producers who depend on market institutions to manage business risk. Giancarlo, along with fellow Commissioners Stump and Quintenz, have consistently highlighted the need for future rule changes to help end-users. Recent actions demonstrate that the CFTC is moving in the right direction. NCBA looks forward to continuing to work with the CFTC to undo prescriptive rules that tie up capital with unneeded regulatory costs.