Public Statements & Remarks

Opening Statement of Commissioner Christy Goldsmith Romero: Regulating for the Future

CFTC Open Meeting

July 26, 2023

Derivative markets are at a period of evolution.  An evolution of technology.  An evolution of new products.  An evolution to more retail customers.  This period of evolution presents both very real opportunities and very real challenges.

We need to regulate for the future with the lessons learned from the past.  This period of evolution requires new ways of thinking about how best we can fulfill our mission.  Thinking through how we can stay ahead of emerging risks and threats so that we are not caught unaware.  Thinking through how we can use technology to meet requirements.  And always, ensuring that we serve public interests.

Today, we consider a rule related to exchanges’ self-certification of new products.  The Commission has an important responsibility to promote market integrity, to ensure the product complies with the law, and to understand risk related to the product.  New products do not come with a history of performance.  Commission staff have experienced a trend of submissions lacking enough information for the staff to fulfill the Commission’s regulatory responsibility.  I hope that this proposed rule fixes that.

We will also consider a final rule related to clearinghouse reporting.  While this rule strengthens some reporting, which is a good thing, the proposed rule grappled with the problem of the increased cyber threat as well as very real issues of technological misfunctions and glitches by proposing an expansion of incident reporting to the Commission.  Ultimately, the final rule does not take up the proposed expansion of reporting due to public comment.  It is important that we listen to public comment to get our rules in a workable form.  However, we still need to deal with the increased cyber threats and other incidents that our staff have felt should have been reported, but were not.  I urge us to continue the assessment of what is the correct fix to this very real evolution in the nature of incidents.

We also consider fixing what has become a technological challenge for Swap Execution Facilities to comply with requirements related to confirmations.  The proposed fix is to codify no action relief, which we granted for several years.  Generally speaking, I believe we need to be careful about granting and then codifying no action relief.  While I support revisiting the rule because of the technological challenges, I will be interested in public comment about whether this is the right fix.

Lastly, is a proposal that would provide relief from certain initial margin requirements for swap dealers for affiliated “seeded funds,” and to expand the use of money market funds as eligible collateral.  I cannot support this rule as I have serious concerns given the lessons learned from the past with the importance of initial margin and money market funds as was seen during the 2008 financial crisis, Dodd-Frank Act reforms, and the 2020 pandemic.  This is a rule recommended by the Global Markets Advisory Committee in 2020.  I appreciate their service.  However, there are important public interests at issue that are important to keep in mind for the future.

Most importantly, I want to thank the CFTC staff for their hard work on each of these rules.  They care about the markets we regulate, and they care about getting it right.  And for that, I am grateful.