Statement of CFTC Commissioner Brian D. Quintenz on Current Market Dynamics and Commission Actions Related to COVID-19
March 18, 2020
The CFTC is closely monitoring markets, participants, intermediaries, and infrastructure in response to the COVID-19 pandemic. The U.S. financial markets remain the deepest and most liquid in the world, and the U.S. derivatives markets have provided enormous opportunities for businesses and industries to manage and hedge many of their commercial, economic, and financial exposures during this critical time. It is absolutely imperative that these markets continue to be open and function as normal as possible to perform their imperative risk transfer function. In the past few weeks, we have witnessed the resiliency of the cleared futures and swaps markets, with record volumes and tens of billions of dollars in margin payments, dwarfing what was exchanged immediately after Brexit, completed without default or delay.
Each of the agency’s divisions is in constant communication with market participants, clearing members, exchanges, and clearinghouses, to ensure market infrastructure continues to function. The Division of Market Oversight’s Market Intelligence Branch provides intra-day updates to the agency on significant market events across a wide range of products, including Libor-OIS spreads, IG and HY CDX spreads, equities futures levels and any related trading halts, agricultural products and the entire energy complex. We continue to closely monitor the situation in real-time and stand ready to work with affected parties to minimize market disruption and unnecessary burdens.
In that vein, the Commission, under the strong, thoughtful leadership of Chairman Heath P. Tarbert, has taken action to provide targeted relief, where appropriate, from specific Commission regulations that are particularly onerous or even impossible to comply with due to social distancing, the execution of business continuity plans, or other preventative measures.
In addition to supporting the issuance of regulatory relief necessary for firms to continue to provide services to their clients or access the derivatives markets, I also support the Commission’s final rule extending the compliance schedule for uncleared margin requirements to September 1, 2021 for entities with smaller average daily aggregate notional amounts of activity. Recognizing the operational challenges associated with phase 5 implementation, BCBS and IOSCO revised the uncleared margin framework to include an additional implementation phase in July 2019. The CFTC’s own Office of the Chief Economist noted that the onset of phase five under the current schedule would have brought approximately 700 entities into our margin regime, implicating around 7,000 relationships that would have to be negotiated to manage initial margin arrangements. I am pleased that the agency, consistent with this revised international framework, is avoiding any potential market disruption that could have occurred due to the practical, operational difficulties caused by a significant number of counterparties needing to begin posting and collecting margin at the same time. Providing these smaller market participants with additional time to come into compliance will facilitate a smoother, orderly transition for the market into the uncleared margin regime.
 See CFTC Staff Letter 20-02; CFTC Staff Letter 20-03; CFTC Staff Letter 20-04; CFTC Staff Letter 20-05; CFTC Staff Letter 20-06; CFTC Staff Letter 20-07; CFTC Staff Letter 20-08; CFTC Staff Letter 20-09.
 See Initial Margin Phase 5 by Richard Haynes, Madison Lau, and Bruce Tuckman, Oct. 24, 2018 available at https://www.cftc.gov/sites/default/files/About/Economic%20Analysis/Initial%20Margin%20Phase%