Thank you, Terry, for that kind introduction. I also would like to thank the CME Group for the invitation.
Since the time of Adam Smith and The Wealth of Nations, economists have consistently written that transparency and open access to markets benefits the broad public and the overall economy.
When markets are open and transparent, markets are more efficient, competitive, and liquid, and costs are lowered for companies and their customers.
President Roosevelt understood this when he asked Congress during the Great Depression to bring transparency, access and competition to the futures and securities markets.
The reforms of the 1930s transformed markets. They helped establish the foundation for the U.S. economic growth engine for decades.
Those reforms have given farmers, ranchers, producers, merchants and commercial companies confidence to use the futures market to manage their risks.
The swaps market emerged nearly 50 years later, but remained dark and closed until just last year.
The swaps market had grown to dwarf the futures market in total notional outstanding. We now know the swaps market is $380 trillion in size, compared to the $30 trillion futures market.
Lacking common-sense rules of the road, the swaps market contributed to the 2008 crisis.
Thus, President Obama and Congress passed reform borrowing from what had worked best in the futures market.
With the completion of nearly all of the agency’s rules and the initial major compliance dates behind us, the marketplace has been transformed.
Bright lights now are shining on the swaps market. Transparency is shining both prior to and after a trade.
The playing field has been leveled through transparency, impartial access, central clearing and straight-through processing. Asset managers, pension funds, insurance companies, community banks and all market participants are gaining benefits that until recently, only swap dealers had.
It’s been a remarkable journey these past five years – and all of you have been part of it. It not only took the CFTC’s 67 finalized rules, orders and guidances. Your thousands of comments, meetings and questions were a critical part of the process. You worked hard – with real costs and against deadlines – to implement these reforms to bring us to a new marketplace.
Foremost, the swaps marketplace now has transparency.
The public can see the price and volume of each swap transaction as it occurs.
This information is available, free of charge, to everyone in the public. The data is listed in real time – like a modern-day tickertape – on the websites of the three swap data repositories.
Regulators also have gained transparency into the details on each of the 1.8 million transactions and positions in data repositories.
Starting last month, the public – for the first time – has been benefitting from new transparency, impartial access and competition on regulated swap trading platforms.
SEFs are required to provide dealers and non-dealers alike the ability to view, place, or respond to all indicative or firm bids and offers, as well as to place, receive, and respond to requests for quotes.
This pre-trade transparency lowers costs for investors, businesses and consumers, as it shifts information from dealers to the broader public.
Congress required that certain standardized swaps must be executed on a SEF or designated contract market (DCM). The trade execution requirement covers all swaps that are subject to mandatory clearing and made available to trade.
We now have 19 temporarily registered SEFs where more than a quarter of a trillion dollars in swaps trading is occurring on average per day.
Four SEFs have made filings for a wide range of interest rate and credit index swaps to be determined made available for trading.
With 90 registered swap dealers, including the world’s largest liquidity providers in interest rate and credit index swaps, sufficient liquidity exists across the entire interest rate swap curve to support these filings.
Thus, I anticipate that by next February, there will be a trade execution requirement for a significant portion of the interest rate and credit index swap markets.