CFTC's Gensler talks to OTC traders


Second, is data reporting to regulators.  As the G-20 committed, the major market jurisdictions have aligned in requiring reporting of transactions to trade repositories.

Through the leadership of the FSB, we’ve also worked collaboratively on a global system for legal entity identifiers (LEI) to facilitate identifying each swap counterparty.

As an interim step until the global LEI is finalized, the CFTC established the CFTC Interim Compliant Identifier for reporting, which will be available shortly as a transition to the global LEI. 

The Commission also has just completed proposed interpretative guidance regarding the application of Dodd-Frank indemnification provisions for swap data repositories (SDRs).  The proposed guidance states that foreign regulators would not be subject to these provisions if the SDR also is regulated by foreign law and the data is reported under foreign law.

Lastly, international regulators have been working on a collaborative approach to the questions of what, when and to whom information stored in global data repositories will be available to regulators.


Third, is the important work on clearing and the clearing requirement.  While our approaches are not identical, there is now a great deal of consistency among the major jurisdictions.  Clearing of standardized swaps between financial firms will be required, significantly lowering the risks of the highly interconnected, international financial system.  Dodd-Frank and the international legislative initiatives consistently ensure that non-financial end-users using swaps to hedge or mitigate commercial risk will not be required to bring swaps into central clearing.

Building upon this, last month, a new set of global standards for central clearing, including 24 principles, was finalized by the Committee on Payment and Settlement Systems and the International Organization of Securities Commissions (IOSCO).

Anticipating these international standards, the Commission completed rules last fall establishing new risk management requirements for clearinghouses, many of which become effective next week and others in November.

We also are collaborating internationally on clearing requirement determinations.  CFTC staff are reviewing clearinghouse submissions received in February and are consulting with our international counterparts as they prepare recommendations for the Commission and for public comment.  The Commission's first determinations are likely to occur this fall.  This broadly aligns with both Japan and Europe.  Japan is expected to publicly announce its determinations this summer to meet a clearing requirement by November.  The Europeans already have begun seeking public comment on the criteria that should be used in making clearing determinations.


Fourth, the international community is closely coordinating on margin requirements for uncleared swaps.  It is critical to have a consistent approach to margin.  This will reduce the opportunity for regulatory arbitrage, and, where possible, promote consistent standards for competition among international swap dealers.  We’re discussing details on initial as well as variation margin; who pays margin and when it is paid; methodologies for calculating margin; and where the margin is held for customer segregation purposes. 

The CFTC’s proposed margin rule published last year excludes non-financial end-users from margin requirements for uncleared swaps.  For all those non-financial end-users perhaps not invited to this ISDA conference, let me assure you I've been advocating with global regulators that we all adopt a consistent approach.

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