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Regulatory Watch

Refitting the CFTC

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March 15, 2018

A year in, CFTC Chairman Christopher Giancarlo is looking to right-size his agency

Game planThe head of the Commodity Futures Trading Commission is going old school when it comes to making sure his agency stays in its lane. In his attempt to “right-size” the footprint of the CFTC, Chairman Christopher Giancarlo wants to “keep it simple stupid.”

In prepared remarks to an audience at the FIA Annual Meeting in Boca Raton, Florida, Mr. Giancarlo said his intention in right-sizing was inspired by the Trump administration’s Executive Order on “Enforcing the Regulatory Reform Agenda.” He noted that while the CFTC as an independent agency isn’t bound by the Executive Order, he believes that it fits with his position that it is time to “re-examine the implementation of our regulations.”

To that end, he wants the CFTC to work with markets to identify areas where regulations could be “simpler, more coherent, and more understandable.” The initiative, he said, is call Project KISS and will gather input “both within the agency and from the public.” He stressed that Project KISS “is not about changing policy” but designed, like the Trump Executive Order, to “simplify and make our rules and regulations less complex, less costly, less burdensome.”

“We are committed to right-sizing the CFTC’s regulatory footprint following years of expansive Dodd-Frank rule writing,” Mr. Giancarlo said. “This means resumption of normalized operations and practices, including greater care and precision in rule drafting, more thorough econometric analysis, less contracted time frames for public comment and a reduced docket of new rules and regulations to be absorbed by market participants.”

Mr. Giancarlo specifically wants to make fixes to rules governing swap execution facilities. In his previous role as a CFTC commissioner, Mr. Giancarlo often complained about the unintended consequences caused by the commission’s rulemaking; that there were rarely impact studies and that they “created fragmentation of global swaps markets.” He called the CFTC’s implementation of the swaps execution mandate under Dodd-Frank “flawed.”

“I have asked DMO [Division of Market Oversight] staff to reconsider the current swaps trading rules to fully accord with Congressional intent, better align to inherent market dynamics, fully allow US swap intermediaries to fairly compete in world markets and begin to reverse the tide of global market fragmentation,” Mr. Giancarlo said. “I intend to put before the Commission a rule proposal for notice and comment in the next few months.”

Aside from the rulemaking at the CFTC, Mr. Giancarlo also wants to boost morale at the agency, promising better funding after several years of flat budgets. He noted that the CFTC also has come to terms on a two-year collective bargaining agreement with its union and filled key positions with capable leaders, including the General Counsel, Director of Enforcement and heads of the Division of Market Oversight (DMO), Division of Swap Dealer & Intermediary Oversight (DSIO), and Division of Clearing and Risk (DCR).

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