Good morning. Jeff, I appreciate that kind introduction. I thank the Futures Industry Association (FIA) for inviting me to speak for my fourth time at this conference.
Before getting started, I’d like to thank Commissioners Sommers, Chilton, O’Malia and Wetjen for their hard work and dedication to improving the markets.
I particularly want to express my appreciation to Jill, who recently announced that she will be leaving the Commission. We will all miss Jill.
She has worked to bring common-sense swaps market reforms to life and to safeguard the integrity of the futures market. Over the last four years, all of the nearly 900 Commission actions we’ve taken together have benefited from her thoughtful input. Though we’re in a town not often known for it, the vast majority of these actions were achieved through consensus.
The New Era of Swaps Market Reform
It’s been an exciting time since this conference one year ago.
Last year, the swaps market was still unregulated. This year, swaps market reform is a reality.
Last year, the swaps market remained largely in the dark. This year, transparency has come to the market with the price and volume of transactions available to the public like a modern-day ticker tape.
Last year, we were talking about when the Commodity Futures Trading Commission (CFTC) would vote on entity and product definition rules. This year, 73 swap dealers and two major swap participants are provisionally registered.
Last year, we were talking about when the “T” of required clearing would start. This year, we meet the same week that required clearing has begun. In just the first two days of required clearing, there has been over half a trillion dollars of customer or buyside clearing.
Last year, market participants were still debating customer protection enhancements.
This year, many important enhancements have been implemented, including gross margining, the so-called “LSOC” rule (legal segregation with operational comingling) and new National Futures Association rules. The Peregrine situation last summer, however, further highlighted that there is more yet to be done.
Last year, few who attended this conference were focusing on the reliability of LIBOR and other similar benchmarks. This year, the public has seen how readily and pervasively LIBOR and similar rates have been rigged.
In the last year, we’ve seen some realignment of swaps and futures as both IntercontintalExchange and CME Group have converted the trading of energy swaps to now being offered for trading as energy futures.
And last year, we had yet to learn that an entrepreneurial startup derivatives platform, born just 13 years ago, would announce the purchase of the over 200-year-old New York Stock Exchange.
A remarkable year indeed.
A year in which participants in the futures and swaps markets have adapted to significant change.
This year is likely to be exciting as well. Implementation of common-sense reforms for the swaps market is being phased in over the course of the year. Clearing will continue to be phased in through September. Swap dealers increasingly will come into compliance with business conduct standards. And transparency will be further enhanced as additional market participants report their transactions.