Opening Statement of CFTC Commissioner Dawn D. Stump before the Global Markets Advisory Committee Meeting

April 15, 2019

Good morning and welcome to the first Global Markets Advisory Committee meeting of 2019.

I am excited to sponsor the GMAC, and believe that the importance of the Committee in today’s increasingly interconnected marketplace cannot be overstated.  The objectives of the GMAC are many, and include helping the Commission determine how it can avoid unnecessary regulatory or operational impediments to global business while still preserving core protections for customers and other market participants.  Another objective of the GMAC is to assist the Commission in assessing the impact on U.S. markets and firms of the Commission's international efforts and the initiatives of foreign regulators and market authorities.  Given today’s global marketplace and the multinational nature of business, I believe that the reconstitution of the GMAC has come at a critical time.

I am delighted to host the first GMAC meeting in several years.  Getting the GMAC up and running has been a goal of mine since I first joined the Commission, and I am hopeful that today’s meeting will be the first of many under my sponsorship.

Before I move to the substance of today’s program, I want to thank the new members of the Committee.  You all have been enthusiastic to be appointed as members of the GMAC, and I have no doubt that this enthusiasm will translate into robust participation and spirited discussion on the complex issues that we will cover, both today and in future meetings.  Your time and service on the GMAC is greatly appreciated.

I would also like to thank the Chairman and my fellow Commissioners for being here today and for their contributions to the discussion.  I would especially like to thank Commissioner Quintenz for his efforts to manage the Committee’s updated charter and organization while serving as the GMAC’s temporary sponsor prior to my arrival at the Commission, and I would like to recognize Andrea Musalem who served as the temporary Designated Federal Officer to ensure a seamless transition.

In addition, I would like to thank our panelists.   We have gathered a distinguished group of speakers, and their eagerness to participate is greatly appreciated.  The presentations are critical to today’s discussion, and will provide a jumping off point for what I can only assume will be engaging discussions among GMAC members around crucial global issues.

Lastly but certainly not least, I would like to thank Andrée Goldsmith, the Committee’s current Designated Federal Officer, for her efforts in making today’s meeting a success.  I am grateful for her tireless work in organizing the group and also for the benefit of her tremendous experience which is reflected by today’s meaningful agenda designed to set the stage for the Committee’s work ahead.

Turning to today’s agenda, we have a full day ahead.  We are focusing this meeting of the GMAC on an examination of the status of the key pillars of the Group of 20 (G-20) directive regarding the OTC derivatives market.  Specifically, today’s agenda revolves around the sometimes-overlooked component of the G-20’s agreement in 2009 in Pittsburgh, which stipulated that regulators should “assess regularly implementation and whether it is sufficient to improve transparency in the derivatives markets, mitigate systemic risk, and protect against market abuse.”  It is noteworthy that in 2009, in the midst of responding to the crisis, the G-20 leadership admitted that as individual jurisdictions implemented the G-20’s principles, a look-back was needed to ensure the G-20’s objectives were being met.

In that spirit, this morning, we will start with a presentation by Shunsuke Shirakawa, Vice Commissioner for International Affairs at the Financial Services Agency in Japan, on Japan’s priorities for its G-20 presidency in 2019.  The Vice Commissioner will focus on the three goals of Japan’s G-20 presidency:  first, addressing market fragmentation; second, addressing the challenges that come with regulating in this era of technological innovation; and third, addressing the issue of financial inclusion in an aging society.  We are pleased to have the Vice Commissioner here with us today, and we look forward to his presentation.

Second, Steve Kennedy from ISDA will pick up on one of the themes in Vice Commissioner Shirakawa’s presentation, and present on ISDA’s work on regulatory-driven market fragmentation.  Steve’s presentation will include a discussion of the sources of market fragmentation, some real-life examples of fragmentation, and potential solutions.

In the afternoon, we will turn to an examination of the status of the key pillars of the G-20 directive regarding the reforms of the OTC derivatives markets.  The third panel will explore cross-border issues with respect to trading venues and central counterparties.  Nicolette Cone of ISDA will walk us through some of the cross-border issues that have arisen with new trade execution requirements and the effect of the October 2017 announcement of a common approach between the CFTC and the European Union regarding certain derivatives trading venues.  Then, Colin Lloyd of Cleary Gottlieb Steen & Hamilton will present on the current framework for U.S. access to non-U.S. swaps central counterparties, some of the issues created by the current framework, and a proposal for a new framework for allowing U.S. customer and proprietary access to non-U.S. CCPs for swaps.  Both presentations raise a number of interesting points for discussion, and I have no doubt that the GMAC members will have plenty of thoughtful comments following these presentations.

Next, we will hear from the CFTC’s own Rafael Martinez and Richard Haynes on initial margin for non-centrally cleared derivatives.  Rafael will provide a general background on the margin rules and then delve into the work of the Working Group on Margin Requirements, an international group under BCBS and IOSCO tasked with developing margin standards for uncleared swaps.  Richard will then present findings from the CFTC’s Office of the Chief Economist (OCE) study on the implementation of Phase 5 of the uncleared margin rules, including the number and characteristics of the entities that will be pulled into scope with the implementation of Phase 5 in September 2020.  I look forward to hearing from GMAC members following these presentations on their experiences with the uncleared margin rules, and their concerns with respect to the fast-approaching implementation of Phase 5.

The last panel will focus on swap data reporting.  I have long believed this to be one of the most critical components of the reform agenda.  With the post-crisis implementation of comprehensive trade reporting requirements and the creation of trade repositories around the world, new issues have arisen with respect to swap data harmonization and data sharing.  David Aron will first present on the CFTC’s work regarding the implementation of a public swap data roadmap and the CFTC’s leadership in global data harmonization efforts.  Next, Kate Delp from DTCC will provide DTCC’s perspective on progress made to date and what the future holds with respect to swap data reporting.

As you can see, our agenda for today is packed and will cover a wide variety of topics.  I am very excited to delve into these issues with the GMAC and I again want to recognize the tremendous amount of work that has gone into planning this meeting and thank everyone for being here.

Remarks of CFTC Chairman J. Christopher Giancarlo at the 2019 Agricultural Commodity Futures Conference, Overland Park, Kansas

April 11, 2019

Good morning, everyone.  Welcome to the Second Agricultural Commodity Futures Conference.  It is good to have you with us.

The Commodity Futures Trading Commission is pleased once again to co-sponsor this event with the Center for Risk Management Education and Research (CRMER) at Kansas State University.  I would especially like to thank Richard B. Myers, President, of Kansas State University, who you will hear from in a moment.  President Myers and KSU’s CRMER Center have been strong and steady collaborators to the CFTC throughout the sponsorship and planning stages of the conference.  There could be no better partner than KSU.

As you know, this conference brings together federal, state, and local governments with agribusiness and academia to discuss a range of topics that are important to the agricultural community who depend on the futures markets.  We are so glad to have you with us today and tomorrow.

Background

This conference comes about at one of the most difficult periods for the agricultural sector in a generation.  Producers face a cyclically low price environment for agricultural commodities and uncertainty caused by global trade tensions.  Many agriculture producers carry significant debt obligations, while others have endured extreme weather conditions.  At the same time, the business environment has been variable for grain elevators and merchandisers.

Meanwhile, there is also a tremendous amount of structural change in the agricultural sector, from the proliferation of data and precision technology in farming and agribusiness, to generational shifts on the farm, to increasing globalization of commodity markets. It’s abundantly clear that production agriculture in the United States will be very different in the coming decade than it is today, though the contours of that change are hard to discern.

Yet, despite these challenges, the resiliency of American agriculture remains unshakable.  That resiliency is natural to the American farming family.  It is part of its DNA.

The Price Discovery Mechanism

Resiliency also derives from a key mechanism underpinning the American agricultural economy.  That mechanism is “market-based price discovery.”  Let me explain.

At all times and in all places, men and women need to make good decisions about what work to do and what work not to do, when to offer goods or services and when not to, what to produce and how much and what to accept in return and when.

This is especially so in agriculture.  Farmers the world around and their purchasers and suppliers need to make the best decisions that they possibly can.  Such decisions include whether to bring a certain plot of land into or out of production and with what crop it should be sown, in what equipment to invest, and whether to commit to transport production from grain bins through trucks, barges, container ships or freight rail infrastructure.  This is especially so during times of rapid transition and transformation as we have today.

 To make these difficult and complex decisions, Americans engaged in production agriculture and, in fact, all participants in the free market have an enormously powerful, but relatively simple tool: the market price signal.

Specifically, I am referring to the price signal that emerges from the price discovery process inherent in our agricultural commodity futures markets.  What an effective tool it is.

The forward curve can tell you to save or to spend, to store or load out.  Comparing prices across commodities can tell you what crops will be the most profitable per acre, the price of protein in wheat or how long to profitably feed cattle.  Even within a futures contract design, there is information about the most economic delivery locations for soybeans.  All of those decisions are the result of price signals sent by futures markets.

This is not just the case in agriculture – in energy, the price signal governs investment in drilling and refining capacity or something as individual as the choice between an SUV or a hybrid vehicle.

So when we at the CFTC see challenges like trade tensions or flooding across the Midwest, we instinctively rededicate ourselves to making sure that our commodity markets are performing their price discovery function in the most accurate and efficient way possible. 

We know that the market price mechanism – and the efforts of the CFTC, the self-regulatory organizations and the exchanges to ensure the markets and prices are free from fraud and manipulation – are a benefit to economic decision-makers every hour of every trading day and in every corner of the world. 

As American farmers and ranchers seek to rebuild or agribusinesses seek to reinvest after losses or restructuring of trade routes, they are relying on us and the markets for clear and undistorted price signals in order to help them make those important decisions.

Dialogue with Market Participants

That is, in large part, why we are here today – to rededicate ourselves, across industry segments, and with academia and financial intermediaries to engage in a dialogue about some of the most pressing and topical issues that agricultural markets are facing today and which go to the heart of price discovery and risk management. 

We have a great program, beginning with a roundtable of my four Commission colleagues.  Then over the course of this afternoon and tomorrow, we will look at futures trading matching algorithms, cash and futures market convergence, storage rate and delivery issues, rule enforcement, market information and risk management.  We have a great dinner keynote by Ambassador Gregg Doud, Chief Agricultural Trade Negotiator in the Office of US Trade Representative.  That is in addition to so many expert panelists and moderators.  We are grateful to all of them for their time and participation. 

I am specifically grateful to my Kansas City colleague, Chuck Marvine, as well as so many colleagues in the CFTC’s Division of Market Oversight, and Charlie Thornton, Director of Legislative Affairs, for their efforts to make this conference happen.  And, of course, we are most grateful to the great Kansas State University.

I have found during my time at the CFTC that the most important thing in being a financial market regulator – and most critical indicator of success – is a constructive dialogue with participants in our markets. 

Bringing people together reminds us that the Commodity Exchange Act, and the markets subject to its jurisdiction, must be regulated in such a manner that they function well for all participants, regardless of trading technology, asset class, market segment or orientation. And that is why we seek all of your views here today.

As I close out my tenure as Chairman I am honored to have served in support of the hard work, dedication and resiliency of America’s farmers, ranchers, grain elevators, agriculture merchandisers and processors. 

Creating this conference in America’s heartland is a signature and bipartisan achievement in strengthening the ties with the CFTC’s first constituency: American agriculture. 

It is also one for which we are most entirely grateful to all of you.

Thank you.

Opening Statement of CFTC Chairman J. Christopher Giancarlo before the Agriculture Advisory Committee Meeting, Overland Park, Kansas

April 11, 2019

Good morning.  Thank you all for joining us today. 

I am pleased to welcome our new Agricultural Advisory Committee (AAC) members. 

I also want to thank Commissioner Behnam for overseeing this meeting last year last year here in Kansas.  The Committee had a lively discussion about ensuring that price discovery and risk management endure as agricultural markets evolve.  That meeting was the first CFTC advisory committee meeting in anyone’s memory that took place outside of Washington.  Today’s meeting may well be the second.

But before we get down to business, I would like to pay homage to one of my predecessors: Kalo Hineman, former CFTC Chair, native Kansan and livestock producer.   

It was Chairman Hineman, in fact, who was responsible for the creation of this Ag Advisory Committee.  He reasoned that the Commission would invariably make better policy and regulatory decisions if it increased its engagement with agricultural market participants and their representatives. 

Chairman Hineman was also a firm believer in bringing people with disparate viewpoints together to discuss important market issues and reach consensus.

It is in that spirit that we have seated here together one of the most diverse and experienced membership of any Ag Advisory Committee.

Chairman Hineman was not only a proponent of marketplace engagement, he was a champion of market innovation. 

One of his signature achievements was the re-emergence of options in agricultural markets. 

The original Commodity Exchange Act of 1936 banned options outright and for the next several decades they were not traded on U.S. exchanges.  Finally, in 1982, redesigned options were reintroduced to agricultural markets. 

During his tenure, Chairman Hineman crisscrossed the country speaking to agricultural groups explaining how this innovation could provide an affordable means of hedging extreme price risk for farmers.  He was absolutely correct in that options in agricultural markets serve that function today.  

It is useful to reflect on the legacy of Chairman Hineman as we begin our work in earnest on the Ag Advisory Committee.  That is that it’s easy to say no to an idea that may be novel or controversial.  What is hard to do is explore that new idea and develop it into something that can enhance markets and benefit market participants. 

It’s equally hard to create a regulatory environment that supports that type of continued innovation.  Let us not take the easy road, but the hard one, in order to ensure that the deepest and most liquid agricultural markets in the world remain a place where farmers, ranchers, elevators, producers and processors meet to manage risk and discover prices well into the future.

Today, we will have panels on the future of FCMs and cash market innovations, both very important and timely topics.  The CME group will also talk about the evolution of electronic trading in agricultural markets, another very timely topic.  We will close by going over new business, including subcommittee recommendations. 

As Chairman Hineman foresaw, advisory committees are important part of our work at the CFTC.  My colleagues and I take them very seriously.  They facilitate communication between the Commission and market participants.  They provide a forum for information sharing and policy recommendations on a variety of regulatory and market issues that affect the integrity and competitiveness of U.S. markets.  They enable communication between the CFTC, the agricultural community, and various agriculture-related organizations that is critical to effective market oversight and policy development.

Next week in Washington, CFTC’s Global Markets Advisory Committee sponsored by Commissioner Stump and the Energy and Environmental Markets Advisory Committee sponsored by Commissioner Berkovitz will hold public meetings.  We also recently had a great discussion at the Technology Advisory Committee meeting sponsored by Commissioner Quintenz.  Each of these meetings is important to the work of the Commission and I salute my fellow Commissioners for their sponsorship and support.

 I invite interested members of the public to engage with us through these advisory committees. 

Thank you again for being here and I look forward to today’s discussions. 

Statement of CFTC Chairman J. Christopher Giancarlo Regarding the Financial Stability Board Industry Roundtable on Reforming Major Interest Rate Benchmarks, Washington, DC

April 10, 2019

Good morning.   Welcome everyone to the US Commodity Futures Trading Commission. 

I especially welcome Randy Quarles, FSB Chair and Fed Vice Chair; Andrew Bailey, UK FCA CEO: Sir David Ramsden, Deputy Governor of the Bank of England; Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank; and Craig Phillips, Counsellor to the Secretary of the US Treasury, as well as other FSB members and government officials and many distinguished representatives of major participants in global financial markets. 

It is our honor to host you here at the CFTC’s Washington Headquarters.

I want to commend Chairman Quarles and staffs of the FSB, the FED and the CFTC for their work in putting together this roundtable discussion.  It is as timely as it is important.

Two years ago, it was the CFTC’s privilege to host another FSB roundtable.  Its agenda was an overall review of the global implementation of the swaps market reforms agreed by the G-20 in Pittsburgh in 2009.

Today, we are here to consider progress in another post-crisis work stream: this one a public-private work partnership developing protocols for the move away from LIBOR to alternative risk-free, benchmark interest rates.

For the past few years, many of the authorities present at this roundtable have been warning market participants of the high likelihood that LIBOR will no longer be available after 2021 for use as a reference benchmark for the global markets.

Today there is growing evidence of a shift in sentiment among market participants from “why are we moving away from LIBOR” to “how do we adopt SOFR”.  That is critical progress.

In fact, judging by timelines set out in the ARRC’s phased implementation plan, we are making good progress here in the U.S. as well as in other currency jurisdictions like Sterling and Swiss Franc, where the transition is well under way.

It was less than a year ago that CME, and then later, ICE, launched SOFR-futures contracts.  Already in 2019, average daily volume is over 100,000 contracts – a roaring success for a brand new index. If one goes purely by press reports, then one will likely form the impression that SOFR’s development has been slow; but from the CFTC’s perspective, the markets are making steady progress.

There is broad consensus that development of SOFR swaps markets will follow SOFR futures. Our expectation is that in the next 12 months, both these markets – SOFR futures and swaps, as well as related debt markets - will hit critical levels where liquidity begets liquidity.

Thanks to the work of the ARRC, major legal and operational steps necessary for the switch from LIBOR to SOFR-based rates  have been identified that are critical for the switch from LIBOR to SOFR-based rates for derivatives, loan products, mortgages, retail loans and others.  Institutions represented at this roundtable today, and many others, are participating actively in various working groups to define the issues and design and implement solutions. One specific project we would like to highlight is the hugely important work by ISDA on new fallback language and triggers, both pre- and post-cessation, for OTC derivatives. We would like to make sure that all market participants participate in the protocol to adopt the new language.

All this is hard work.  We in the official sector would be remiss, indeed, ungracious not to acknowledge the commitment and effort of market participants to work on these issues.  And, so we do express our acknowledgement to them.  Yet, we also assert our determination that progress must continue through to completion of the move away from LIBOR to SOFR.

From the official sector perspective, we collectively stand ready to provide any guidance, relief, and other support required. While there is strong interest in addressing regulatory hurdles, we are also open to suggestions on regulatory tools to incentivize transition to SOFR-based benchmarks.

As for the CFTC, we are active participants in the efforts of the FSB’s OSSG and the US ARRC.  We also have our own initiative focused on regulatory and related issues through the work of the Benchmark Reform Subcommittee of the CFTC’s Market Risk Advisory Committee, sponsored by my fine colleague, Commissioner Russ Behnam.  That subcommittee is chaired by Tom Wipf, Vice Chairman of Institutional Securities at Morgan Stanley, who will speak to us shortly.

At the end of the day, markets exist to serve the need of end users - American families, corporates, municipalities and others. These users are exposed to the greatest risk if we do not fix this market vulnerability – reliance on an index which has clearly outlived its economic relevance as a benchmark.  The authorities represented in this roundtable and the market institutions assembled today remain committed to this effort.  Together, we can get this done.

Remarks of CFTC Commissioner Rostin Behnam at the ISDA 34th Annual General Meeting, Grand Hyatt Hong Kong, Hong Kong 

Sowing the Seeds of Success in 2020

April 9, 2019

[Delivered in Hong Kong April 10, 2019] 

Introduction

Thank you for the kind introduction; it is a great pleasure to be here.  I want to thank Eric Litvack, Scott O’Malia, and the International Swaps and Derivatives Association (“ISDA”) for inviting me to join you today.  Before I begin, please allow me to remind you that the views I express today in these remarks and discussion to follow are my own and do not represent the views of the Commodity Futures Trading Commission (the “CFTC” or “Commission”) or my fellow Commissioners. 

I last had the pleasure of addressing ISDA members in late October or autumn of last year during the 2018 ISDA Annual Japan Conference.^[1]  Six months later, it is now spring.  Like many cities across the globe, spring is a time of renewal and beauty in Washington, D.C.  Part of Washington’s splendor this time of year is due to the gift of 3,020 Japanese cherry trees to the American people over 100 years ago from the Mayor of Tokyo, Yukio Ozaki.  Mr. Ozaki offered the gift as a gesture to recognize the growing relationship between the Japanese and American people. 

More personally, the blooming of the cherry trees represents an exciting time for me.  To coincide with the cherry blossom bloom, the first Sunday of April always marks the annual Cherry Blossom Ten Mile Run.  The race course weaves through the city’s captivating monuments, including the Tidal Basin where Thomas Jefferson sits among a cloud of blossoms.  I have run that course every year that I’ve called Washington, D.C. my home.

Before coming to Hong Kong, I spent a few days in Tokyo, spending time at the Japanese Financial Services Agency (“JFSA”), and visiting market participants including Tokyo-based ISDA members.  Unfortunately, arriving in Tokyo Saturday evening meant that I missed the Cherry Blossom Ten Miler for the first time in eight years.  However, I had my own cherry blossom run this year – in Tokyo.  As I ran around Tokyo Sunday and Monday morning, the beautiful blossoms gave me a sense of familiarity and comfort.

Seeing cherry blossoms blooming in Japan for the first time, I recognized subtle and not so subtle differences in the trees, specifically their size and shape as compared to the ones I have grown familiar with in Washington.  The cherry trees in Washington are situated close together around a discreet part of the city.  As a result, many of the trees, over the course of their lives, have developed a distinct shape and size.  In contrast, I noticed that many of the cherry trees in Tokyo, despite having the same beautiful blossoms and familiar smell, are far larger, having a much wider canopy, spreading broadly like a bird’s wings.

It occurred to me as I ran in Tokyo that these similarities and differences recall Mayor Ozaki’s original gesture, and personify, in many ways, the current relationship among U.S. and Asian financial regulators.  As we all have taken different approaches in implementing the G20 reforms since the financial crisis, cherry blossoms are a good reminder that despite our differences, the foundations and driving principles are the same.  Regional differences, shaped by culture, climate, and history should not cloud the core similarities we all share and have invested in.  It’s these commonalities that are driving a fresh look at cross-border harmonization that will, in my mind, lead to safer, stronger, and more transparent markets across the globe.

In October, I talked about the collective strength within the CFTC, brought by the expertise and diversity among its five member-commissioners, and the collective strength in the global collaborative efforts among regulators and market participants in addressing challenges such as benchmark reform, initial margin phase-in, cross-border regulation, Brexit, and emerging financial technologies.  In considering those issues, I acknowledged that an uncomfortable level of uncertainty cannot deter us from taking action.  As American aviation pioneer Amelia Earhart once said, “The most difficult thing is the decision to act, the rest is merely tenacity.”

As we enter the second quarter of 2019, I’m pleased to say that our various jurisdictions chose to act.  We have persisted towards resolving LIBOR and the “big bang” that will be the final phases of the uncleared margin rules.  In the U.S., the Commission and the prudential regulators are actively addressing the possibility of a “no-deal Brexit” by putting measures in place to provide certainty and working with our international counterparts to preserve the stability of trade execution and clearing relationships.^[2]  We’ve continued to re-evaluate the reforms put in place in the wake of the financial crisis and to consider whether they remain fit for purpose in addressing new and emerging risks.  To that end, conversations continue to evolve and build consensus around cross-border regulation of swap dealing activities.  The Commission also has continued the important work of considering the effectiveness of our rules governing swap execution facilities (“SEFs”), issuing both a rule proposal on SEF regulation generally and a request for comment regarding the practice of “Post-Trade Name Give Up.”^[3]

As I have said before, regulators should avoid becoming overconfident in the systems we’ve built and remain nimble in our reconsideration of past policies and practices and vigilant as we prepare for the challenges to come.  I believe we are on the right course as we prepare for 2020 and beyond.

A new Chairman will lead the Commission into 2020.  The current expectation is that Chairman Giancarlo will depart before completion of the SEF overhaul and before putting a complete slate of cross-border rule proposals before the Commission to initiate the formal rulemaking process.  I expect that his successor, Dr. Heath Tarbert, who currently serves as Assistant Secretary for International Markets at the U.S. Department of Treasury, will be equally bold in his approach to finalizing and fine-tuning our regulatory landscape as it applies domestically and abroad.    

During Dr. Tarbert’s March 13^th nomination hearing before the United States Senate Committee on Agriculture, Nutrition, & Forestry, in addressing questions about completing the financial reform efforts, Dr. Tarbert stressed the importance of ensuring that “the seeds of the next crisis are not sown in response to the last one.”^[4]  For example, he noted that as we push more derivatives to centralized clearing, we need to make sure that those clearing houses are safe and sound and have the risk management practices that they need.  I wholeheartedly agree and am equally committed to ensuring that we don’t weaken our rules to undermine safeguards put in place by our predecessor commissioners. 

Turning back to where we are today, I’d like to deliver some brief remarks before sitting down with Mr. O’Malia for a less formal discussion.  I think it’s best to provide some updates on how the Commission has been addressing our greatest challenges of the moment—LIBOR, margin, approaches to cross-border regulation, and SEF reform—and where we may be heading towards 2020.

The State of LIBOR Transition

No issue embodies the need to embrace change like the transition from the London Interbank Offered Rate (“LIBOR”) and other “IBORs” to alternative risk-free rates (“RFRs”).  With no guarantee of LIBOR’s continuation beyond 2021 as a representative benchmark, developing alternatives that are fit for purpose has launched our industry into uncharted territory.  Since the LIBOR manipulation scandals first came to light amidst the financial crisis, there has been a slow building hum of activity in pockets around the globe as regulators, international bodies, and market participants identify alternative RFRs and develop transition plans.  We’ve chosen to act; but we need to be tenacious in approach because what we’ve learned over this last decade is that the pervasiveness of LIBOR gave us a false sense of stability.  We did not anticipate that the underlying market for LIBOR submissions would dissipate or that structural vulnerabilities would inspire widespread misconduct.  Our collective overconfidence in the system we built led us to this point in transition.  We must now address how most fallback language in underlying contracts simply either does not anticipate or does not adequately address a situation where LIBOR will be permanently unavailable.^[5]  Fortunately, ISDA, at the request of the Financial Stability Board’s Official Sector Steering Group, is leading the effort and updating the definitions of USD LIBOR and other IBORs used in derivative contracts to include new fallbacks and is planning to publish a protocol to allow market participants to include fallbacks within legacy contracts to address benchmark cessations.^[6]

In the United States, a group comprised of market participants called the Alternative Reference Rates Committee or “ARRC” convened to (1) identify an alternative RFR for use primarily in derivatives contracts; (2) prepare a plan to facilitate the acceptance and use of the selected alternative RFR on a voluntary basis; and (3) consider best practices for contract design to ensure that contracts are resilient to a possible cessation or material alteration of existing or new benchmarks.^[7]  In 2017, the ARRC identified the Secured Overnight Financing Rate or SOFR as its recommended alternative to USD LIBOR.  SOFR Futures began trading at the Chicago Mercantile Exchange (“CME”) and ICE Futures Europe, in May 2018 and October 2018, respectively.  In the ten months since launch at CME, SOFR Futures have traded the equivalent of nearly $4 trillion in notional value with cumulative volume exceeding 2 million contracts.^[8]  LCH and CME began clearing SOFR-based over-the-counter (“OTC”) overnight index and basis swaps in July 2018 and October 2018, respectively.^[9]  Just last month, trading in SOFR-linked swaps surged with about $13.6 billion changing hands, a number that is almost twice its previous high from January 2019.^[10]

As SOFR gains significant liquidity, the ARRC is promoting the use of SOFR on a voluntary basis and recommending more robust fallback language in new contracts referencing LIBOR.^[11]  As I explained back in October, neither the Federal Reserve nor U.S. regulators will mandate an alternative RFR for use in new contracts or in fallback language.  Authorities do stand ready to facilitate these efforts by helping to avoid market dislocations, but our policies, mandates, and missions do not always support requiring compulsory industry standard setting or change through regulation.  However, we can best minimize basis risk, ease hedging, and avoid market fragmentation if we take a common approach.^[12]  

For my part, as the sponsor of the CFTC’s Market Risk Advisory Committee (“MRAC”), I convened the full Committee last July to focus on benchmark reform.^[13]  Following the meeting, the Commission established the Interest Rate Benchmark Reform Subcommittee (“Subcommittee”) to provide reports and recommendations to the MRAC regarding efforts to transition U.S. dollar derivatives and related contracts to SOFR and the impact of such transition on the derivatives markets.^[14]  Towards a goal of providing input and recommendations to the MRAC relating to policy changes that may impact LIBOR reform, the Subcommittee aims to: (1) remove hurdles to the transition to SOFR; (2) provide incentives for market participants to transition to SOFR; and (3) avoid the inadvertent creation of a safe harbor in policy changes the Subcommittee recommends.^[15]  To further its efforts, the Subcommittee intends to focus on three work streams covering initial margin, clearing, and disclosures.  In a few short hours, the Financial Stability Board will host a benchmark reform roundtable at the CFTC’s offices in Washington, D.C., where the MRAC will present an update on its work.

Initial Margin—Engineering Implementation

September 2020 marks the deadline for the final step in the five-step phase-in period for the exchange of initial margin, or “IM,” referred to as the “IM big bang.”  Trade associations, including ISDA, estimate that over 1,100 additional counterparties and 9,500 relationships with new documentation requirements will result from the IM big bang.^[16]  Since April of 2018, the Working Group on Margin Requirements (“WGMR”) Monitoring Group, which includes representatives from more than 20 regulatory authorities around the globe,^[17] has put forth and completed a stocktaking exercise and internal report to the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) on the implementation status of the margin standards focused on the 2020 phase-in. 

On March 5, 2019, BCBS/IOSCO issued a statement addressing two areas of challenge identified by the Monitoring Group.^[18]  First, BCBS/IOSCO recognized that the impending replacement of interbank offered rates such as LIBOR may require market participants to amend legacy contracts, potentially creating new contracts subject to margin requirements that would have otherwise been out of scope.  To address any uncertainty, which may have discouraged market participants from amending such contracts, BCBS/IOSCO clarified that amendments to legacy derivatives made solely to address interest rate benchmark reforms do not require the application of the margin requirements for the purpose of the BCBS/IOSCO framework.  Second, BCBS/IOSCO recognized that the remaining phases will bring a large number of financial and other end users into the scope of the IM requirements with the attendant difficulties associated with beginning to exchange IM with a large number of counterparties.  Accordingly, BCBS/IOSCO highlighted that the framework does not specify documentation, custodial, or operational requirements if the bilateral IM amount does not exceed the framework’s €50 million IM threshold.   Essentially, while covered entities are expected to act diligently when their exposures approach the threshold, they may continue to trade without compliant documentation and relevant arrangements in place until they exceed it.

To be clear, the CFTC is currently considering the March 5^th BCBS/IOSCO guidance.  We are engaging with the U.S. prudential regulators and anticipate issuing additional information relevant to clarifying the timing of the documentation period.  In the interim, the Commission continues work with the WGMR monitoring implementation.  The various concerns expressed by stakeholders such as those put forth by ISDA and SIFMA (the Securities Industry and Financial Markets Association),^[19] are being closely monitored.  The CFTC remains committed to implementing its IM rules consistent with their original intent in a feasible manner.  We continue to engage and provide leadership in the WGMR towards identifying and implementing the most effective solutions.

Cross Border—Making Progress

Six months ago, Chairman Giancarlo released his white paper on cross-border swaps regulation in which he shared his vision for updating the Commission’s current guidance-based cross-border application of its swap regime to a rule-based framework with greater regulatory deference to third-country regulatory jurisdictions that have adopted the G-20 swaps reforms.^[20]  Some of the suggested improvements include: (1) expanding the use of the CFTC’s exemptive authority for non-U.S. central counterparties (“CCPs”) that are subject to comparable regulation in their home country and do not pose “substantial risk” to the U.S. financial system; (2) exempting from SEF registration non-U.S. trading venues in jurisdictions that have adopted comparable G20 swaps reforms; and (3) reconsidering the criteria for determining when non-U.S. persons’ swap dealing activity poses a “direct and significant” risk to the U.S. financial system requiring swap dealer registration with the CFTC.^[21]

As I’ve pointed out, the prior Commission’s decision in 2013 to address cross-border swaps regulation through agency guidance as opposed to regulation was intended to ensure that it would leave future CFTC leadership with the flexibility to fine-tune and adapt its approach to cross-border swaps regulation as the remainder of the global regulatory landscape evolved.^[22]  I agree with the Chairman that it is an appropriate time to take stock of our global reforms and work together towards greater recognition of and deference to each other’s regulatory adoption and implementation of the G-20 reforms and approach to swaps regulation.

Last month, the Chairman announced that Commission staff was preparing the first formal proposals for rulemakings aimed at effectuating reforms outlined in his white paper, and stated his intention to put these proposals before the full Commission for formal vote before his departure.^[23]  As described by the Chairman, one proposal will address the registration of non-U.S. CCPs clearing swaps for U.S. persons.^[24]  Among other things, this proposal will provide for an alternative registration framework for non-U.S. CCPs that do not pose a substantial risk to the U.S. financial system.  These CCPs would still be able to offer customer clearing to U.S. person through futures commission merchants (“FCMs”).  Within this framework, the CCP’s home country regulator would continue to have supervisory primacy, with the CFTC more narrowly focused on U.S. customer protection. 

The proposal will also provide an option for non-U.S. CCPs to be exempt from CFTC registration as a derivatives clearing organization or “DCO.”  In contrast to the current CFTC approach, this proposal would permit exempt DCOs to offer customer clearing to U.S. eligible contract participants through foreign clearing members that are not registered as FCMs.^[25]  

Another proposal will address the registration and regulation of non-U.S. swap dealers and major swap participants.^[26]  As described by the Chairman, this proposal will shift the focus to the risk that non-U.S. swap dealing activity poses to the United States in a manner that ensures that our swap dealer rules only apply where the activity poses a “direct and significant” risk to the U.S. financial system, consistent with section 2(i) of the our governing statute, the Commodity Exchange Act (“CEA”).^[27]

I look forward to engaging with my fellow Commissioners, fellow global regulators, and the public as we consider Chairman Giancarlo’s proposals.  I will remain vigilant as we reconsider the Commission’s past interpretation of the extraterritorial reach of our statutory and regulatory swaps authority.  Such authority is limited to activities outside the U.S. where such activities have a “direct and significant connection with activities in, or effect on” U.S. commerce or are evasive.^[28]  As we explore what it means to have a “direct and significant connection” to the U.S. financial system in terms of risk, we must be diligent in our analyses of relationships and interconnections among markets and market participants as well as appropriately deferential to risk mitigating factors.  We must also remain vigilant and consider how any decisions we make could apply to new and emerging risks.  And as always, whatever interpretation we pursue must not run counter to clear Congressional intent.^[29]

SEFs—Some Needed Seeds of Change

The Commission also has continued the important work of considering the effectiveness of our rules governing SEFs.^[30]  Targeted SEF reforms can help market participants by providing certainty and eliminating unintended consequences.  Last November, the Commission publicly voted to propose for public comment various amendments to the rules applicable to SEFs, which appear in part 37 of our rules.  Despite reservations, I voted in favor of publishing the proposal for comment.^[31]  I fully recognize that our existing part 37 rules are not perfect and that we need to hear from market participants regarding how we can improve the regulatory framework for SEFs.   

We received more than 50 comments from market participants, and many of them drill down deeply on the rule and its implications.^[32]  CFTC staff is busily reviewing and considering the comments.  The comments express many concerns – they echo the numerous concerns that I raised at the open meeting and many additional concerns as well. 

One concern that we have heard repeatedly is regarding how the proposal will interact with any action that the Commission takes to reform our current cross-border rules and guidance.  Let me provide at least some reassurance here.  The CFTC has worked hard to address existing challenges in cross-border trading.  The Commission issued U.S./EU trading venue recognition in late 2017.^[33]  Just last month, the Commission issued similar trading venue recognition for Singapore.^[34]  My understanding is that, even in the unlikely event that the Commission was to approve a final SEF rule that exactly mirrors the proposal, the Chairman does not expect the SEF proposal to impact SEF registration exemptions already in place for EU and Singapore trading venues.^[35]  I am hopeful that this is the case.  But if we change the SEF rules significantly, there will be work to be done.  Obviously, we have determined that the EU and Singapore swap trading venue regimes subject SEFs in those jurisdictions to comparable, comprehensive supervision and regulation on a consolidated basis.^[36]  If we have a re-imagined SEF regime like that set forth in the SEF proposal, it will be necessary to revisit these determinations.  The Chairman’s statements give assurance that, when this analysis is done, the Commission will find that these regimes are still comparable. 

At the open meeting regarding the proposal, I expressed the concern that some products may be more appropriately traded off SEF.  I also raised the possibility of unintended consequences – it seemed to me that tying the trade execution requirement to the clearing requirement could actually discourage voluntary central clearing.  Many of the commenters, including ISDA, expressed similar concerns, and argued that “there should be an independent determination as to whether or not a particular swap possesses adequate liquidity to be trading on a SEF and that such determination should be made separate from the clearing determination.”^[37]  I also appreciate ISDA’s suggestion that the Commission’s Market Risk Advisory Committee could provide assistance in making MAT determinations.^[38]  I believe that the MRAC, with its broad range of market participants, would be an excellent forum for further discussion of how to improve the existing made-available-to-trade process. 

Looking at SEF reform as a whole, though, I have a broader over-arching concern.  Over and over, market participants tell me that targeted changes need to be made to the SEF regulatory regime.  They also tell me that they have spent a great deal of resources to build systems and businesses that comply with our existing SEF rules.  Asking market participants to make fundamental changes amounting to an overhauling of the entire system should only be done in circumstances where there is a regulatory concern that necessitates – demands – action. 

In 2008, the lack of transparency in the over-the-counter swaps market contributed to the financial crisis because both regulators and market participants lacked the visibility necessary to identify and assess swaps market exposures and counterparty relationships.^[39]  Expansive regulatory reform was necessary.  We are in a more mature regulatory position now and we should target our reforms to provide clarity and certainty for market participants, and to make improvements that add value to the existing framework.  To that end, there are a number of changes that I believe just about everyone agrees upon.  Most SEFs currently operate under multiple no-action letters granted by the CFTC’s Division of Market Oversight.  While the purpose of this targeted relief was often to smooth the implementation of the SEF framework, codifying or eliminating the need for existing no-action relief would provide market participants with greater legal certainty.  We should not allow issues with the broader vision of the SEF proposal to distract us from more targeted changes, like codifying no-action relief or making targeted improvement of the MAT process or permissible methods of execution.  But we also should remember that we do not need to accept the broader vision of the SEF proposal in order to provide market participants with the certainty they need and the SEF market they deserve.

Conclusion

Looking ahead to 2020, there is much to accomplish.  We are off to many good starts.  With ongoing dialogue and engagement, I believe our decisions to act will prove effective.  The tasks before us present great challenges, but we will persevere as the markets and the people they employ and serve need certainty.  I began these remarks with some thoughts on spring and the cherry blossoms as well as a quote from Amelia Earhart.  To bring us full circle, I will note that many people do not know that in 1915, the United States gave a reciprocal gift of flowering dogwood saplings to the city of Tokyo.  It took us a few years, but we delivered our own living symbol of renewal.  As for Ms. Earhart, she once remarked that, “[I]t is far easier to start something than to finish it.”  Yes, Ms. Earhart, we got it. 

Thank you.

Remarks of Chairman J. Christopher Giancarlo at the Eurofi Financial Forum, Bucharest, Romania

“A New Vision For EU-US Regulatory and Supervisory Cooperation for Derivatives Markets”

April 4, 2019

Good afternoon.  It is my great pleasure to be here again at Eurofi.  I wish to thank David Wright, Didier Cahan and Marc Truchet for organizing once again a great conference.

I also wish to express my deep appreciation to the Romanian Presidency of the European Union, the Prime Minister, the Minister of Public Finance, and the Board of the National Bank of Romania for inviting all of us to Bucharest.

Being here in Bucharest, it seems fitting to begin my remarks by recalling the great wit of Romanian writer Ion Luca Cariagiale, who joked:

“Opinions are free, but not mandatory.”

Since I am here in what is most likely my last appearance at Eurofi as Chairman of the U.S. Commodity Futures Trading Commission, I hope you will forgive me if I put forth a few free opinions.  Of course, they are not mandatory!

I understand that Ion Luca Cariagiale also said:

“Do you want to get to know things?  Look at them closely.  Do you want to like them?  Look at them from afar.”

If you will permit me, I would like to use my time to look both from near and afar at EU-US regulatory and supervisory cooperation and lay out a vision for the future.

Having led the CFTC for the past two years, I have been very closely engaged in this cooperation, and I believe I see it clearly.  But I also have the benefit of some distance which gives me great affection for its effectiveness and durability.  From both vantages, I see its even greater potential.

Why It Matters

I am optimistic because I know it is a priority for European and U.S. policymakers to strengthen our regulatory and supervisory cooperation.  Only through such cooperation can we ensure that our financial markets will continue to support the growth of our mature market economies and increase the prosperity of our citizens.  Should we fail to cooperate, we will stunt the efficiency of our markets, producing fragmentation and denying our firms, businesses and farms the necessary capital and risk hedging tools needed to increase productivity, research and develop new technologies, hire more workers, and invest for the long-term.

Equally importantly, Europe and the United States must continue to show the world that we can work together.  Europe invented entrepreneurship, and America embraced it.  Together, we are champions of the rule of law, the protection of person and property, and free market economics.  These attributes have made ours among the world’s most important economies.  That is why I am optimistic that, working together, we can show the rest of the world the benefits of free and open markets underpinned by sound regulation and strong enforcement.

What this means for financial regulation is that the standards and rules we – Europe and the United States – develop together to govern how we trade, invest and hedge set the standard for financial market conduct around the world.  In this respect, cooperation between Europe and the United States represents a demonstration of leadership that goes well beyond our respective markets.

Overcoming History

I speak before an audience of experts of trans-Atlantic financial markets.  You, of all people, know that Europe and the United States have not always found it easy to cooperate on matters of financial regulation.  You know that now is the time to overcome any pessimism grounded in the disappointments of the past.  Now is the time to focus on how we can work together now and in the future.

The first step to overcoming this history is by confronting it head on.  Nearly five years ago when I joined the CFTC, I came to Europe and gave an honest assessment of the CFTC’s cross-border policies.[1]  I admitted that the CFTC could well be seen to have started the current rift in cross-Atlantic swaps cooperation with its 2013 cross-border guidance imposing CFTC transaction rules on swaps traded by U.S. persons even in jurisdictions committed to implementing G-20 swaps reforms.  That approach alienated many overseas regulatory counterparts and squandered important American leadership and influence in global reform efforts.

And two-and-a-half-years later when I became Chairman of the CFTC, and gained the authority to direct the CFTC staff to change policies, I took further steps to acknowledge the problems caused by the CFTC’s expansive approach to applying its swaps rules to cross-border activities.  I laid out a detailed program to remedy the errors of such past policies.[2]

This openness to honestly assess how we have worked with each other in the past is something that I hope all authorities – here in Europe and in the United States – will do.  Only through a willingness to change direction, when confronted by evidence showing that we may have been wrong, will we be able to overcome the past.

Building Trust

The time is at hand for Europe and the United States to take steps to rebuild trust.  As CFTC Chairman, I am proud of the recent series of joint announcements and commitments with my counterparts in Europe and Asia on a range of regulatory actions.[3]  These joint statements are public commitments, which the CFTC has followed through on in concrete terms.  They help build trust as they show we can make agreements and stand by them.

Transparency is also a key part of building trust.  While at the CFTC, I have authored three detailed white papers laying out my views on the regulation of swaps execution facilities, the effectiveness of the CFTC’s implementation of the Dodd-Frank Act, and cross-border policies.[4]

Some people ask why I wrote these papers.  There are many reasons, but one purpose was to inform global regulatory counterparts of the direction of our policies and the principles upon which that direction is set.  It has enabled us to solicit thoughtful input from our global partners.  In particular, it has allowed European and U.S. authorities to have substantive discussions about how to optimize global swaps reform and better calibrate it to maintain healthy financial markets across international borders.  Being transparent in the regulatory course we follow encourages our overseas counterparts to anticipate and rely on the actions we take.

Moreover, I have sought to build trust by directing the CFTC to be an active, engaged and positive participant in international standards setting activities.  Today, the CFTC participates in more international work streams than ever in its history.  The agency is an active contributor to the International Organization of Securities Commissions (IOSCO), Financial Stability Board (FSB), and IOSCO’s joint work with the Committee on Payments and Market Infrastructures and Basel Committee on Banking Supervision.  More importantly, the CFTC chairs or co-chairs international working groups on market fragmentation, efficient resiliency of OTC derivatives reforms, commodity principles, cybersecurity, regulation of financial market infrastructures, international data standards, and implementation monitoring and assessment.

I am proud that CFTC leadership has made it possible to have IOSCO, the FSB and other groups produce international standards, guidance and reports that have substantially advanced the goal of a more resilient global financial system while supporting robust markets.  And I am pleased to observe that often our closest partners in these groups are European authorities.

Commitment to Shared Principles

The last ingredient to successful regulatory and supervisory cooperation between Europe and United States is a commitment to shared principles.

First, we should share a commitment to market-based solutions.  When facing common regulatory challenges, we should be looking to see how our rules and policies can help make our markets work better and more efficiently.

Internationally, the CFTC has been a strong supporter of the efforts in the FSB and IOSCO to review the effectiveness of the G20 reforms.  Again, these reviews are not designed to weaken the reforms – I have always been a strong supporter of the G20 reforms – but to make sure they are implemented in ways that enhance derivatives markets, not stifle them.

At the CFTC, one of my early initiatives was Project KISS, which was a massive review of CFTC rules and regulations to make them simpler, less burdensome and less costly, but not less effective.

And consider the CFTC’s approach to the development of new derivatives products on crypto-assets like Bitcoin.  We have resisted calls to use our legal powers to suppress the development of crypto-assets and the underlying technologies that support them.  Instead, we have favored close monitoring of market developments while not hindering the introduction of new products like bitcoin futures, which have proven invaluable in letting market forces determine the appropriate value of the bitcoin.[5]

Second, we should share a commitment to open markets and competition.  Both European and U.S. policymakers have a common interest to make our respective markets the most effective places to trade and to do business.  They should be neither the least, nor the most, prescriptively regulated – but the best regulated for the unique characteristics of our marketplaces, balancing market oversight, health and vitality.  This goal will not be achieved by setting up regulatory barriers and separating ourselves from our foreign counterparts, but by removing the barriers that stand in the way of global market participants choosing the best markets for their needs.  Thus, our common approach to regulation should not be based on a crude measure of the quantity of regulation, but the quality of regulation and oversight.  In this respect, regulatory and supervisory cooperation should lead to greater access to each other’s markets.

Finally, we should share a commitment to outcomes-based deference.  I am more convinced than ever that regulatory deference – whether it be through equivalence and recognition decisions or through substituted compliance orders and exemptions – is the only rational way to ensure that jurisdictional rules can work constructively to provide sound regulation for cross-border trade, investment and risk mitigation.

And what is most critical is the manner in which we apply such deference.  Deference only can work if we seek comparable regulatory outcomes.  It must be based on the understanding that each market has unique rules, practices, states of development and range of market participants.  Thus, it is only right that regulators accept reasonable differences suitable to local conditions, law and traditions while achieving similar outcomes.

During my tenure as CFTC Chairman, the CFTC has made a series of deference decisions for Europe, Japan, Singapore and Australia, among others.  In each case, we have accepted that the relevant foreign jurisdiction has requirements different from what we have in the United States.  Still, we have felt comfortable acting with deference despite such differences.

To do otherwise, would be to tell other jurisdictions that all markets are the same and, therefore, everyone needs to conform to one way of doing things.  This cannot be right.  If we do not embrace in a meaningful way outcomes-based deference, then tools like equivalence become not bridges to build cross-border markets but cudgels to force rule taking.  Such a tactic will never be successful between Europe and the United States.

Challenges

Improved regulatory and supervisory cooperation, however, will require effort.  We must be cognizant of the challenges that have previously undermined, and will continue to pose a threat to, future regulatory and supervisory cooperation.

I spoke earlier of the importance of being able to build trust through agreements and public commitments.  As many of you know, I have been vocal in expressing CFTC concerns with EMIR 2.2.  One primary reason EMIR 2.2, and the manner by which it has been presented, has created such anxiety in the United States is that, for a long time, there was an unwillingness by the European Commission to acknowledge any commitment to the 2016 agreement between the CFTC and EC on CCPs.

Does Europe have the right to decide how it wishes to supervise CCPs?  Yes.  Does Europe have the right to consider how third country CCPs may pose a systemic risk to Europe?  Certainly, it does.  But should Europe do so without regard to past commitments to the CFTC?  Not if it is serious about maintaining trust and recognizing the importance of regulatory and supervisory cooperation with the United States.

Another challenge is to insulate market regulation from politics.  Market regulation must focus on objectives such as investor protection, the safety and soundness of market utilities, and the efficiency of trading markets.  When, instead, domestic politics determines regulatory priorities, picks winners and losers and interferes with the operation of the market – then cross border regulatory and supervisory cooperation is challenged.  Regulatory cooperation works best when it is conducted free of political considerations.

Finally, there is the challenge of communication.  Regulatory and supervisory cooperation depends on honesty between regulators.  Authorities are made up of people, and there needs to be frequent and forthright communication.  So much depends on the day-to-day relationship of the people who serve the different authorities.  Honest brokers and truthful interlocutors are essential.  When they are not present, cooperation has little chance.  When they communicate, as they do here at EuroFi, regulatory cooperation is strengthened and increased.

In all of our international engagements with fellow financial regulators and related regulatory bodies, I have made it my priority for the CFTC to act in a forthright and candid manner, displaying leadership when appropriate and respect and due consideration at all times.  The CFTC aims to be considered a trusted and worthy counterparty by its overseas regulatory counterparts.

Conclusion

As I approach the end of my time at the CFTC, I wish to express my tremendous respect for my many counterparts in Europe – from the officials in the European Commission to the staff in ESMA and the ECB and the personnel in the range of national authorities with whom the CFTC works with on a regular basis.  Everyone I have encountered has been intelligent, thoughtful and professional.  And I pay them my highest compliment when I say that they are dedicated public servants who work tirelessly to do what is best for European markets and European interests.

That is why I conclude on an optimistic note.  Romania’s great son, Ion Luca Cariagiale, told us to be thoughtful in how we look at things.

I look at a future where Europe and the United States grow markets that support prosperity and encourage innovation.  I look at a future of shared principles of market-based solutions, healthy competition and regulatory deference.  I look at a future where the problems we face, whether economic, social or environmental, are addressed with the help of creative entrepreneurship, free enterprise and most essentially, well-ordered and vibrant trading markets.

As I come here to Eurofi and hear talk about Capital Markets Union, digital distribution, and fintech, I know European policymakers share this vision, a vision in which US and EU markets continue to develop in their own unique ways, reflecting the different legal, commercial and social characteristics of Europe and America, while drawing on common principles and pursuing similar regulatory outcomes.

Moreover, it is a future in which our markets actively support each other with knowledge, skill and capital flowing freely between them, making both stronger and more vibrant, under the thoughtful oversight of European and U.S. regulators working cooperatively with one another.

I see a bright and prosperous future, one of courage, confidence and commonality.

I look forward to this future.  With your help and leadership, we shall see it together.

Thank you very much.