Follow Us:

Looking Ahead

Table of Contents >

Approaching the mid-year point of FY 2013, the CFTC is shifting toward implementation of rules, as well as the direct oversight of the swaps market. The Commission is closing in on remaining rules to be completed, including capital and margin, trade execution requirements and cross-border guidance.

Clearing, Transparency, Swap Dealer Oversight, Cross-Border Application of Swaps Market Reform

In the first quarter of FY 2013, the Commission finalized the initial set of clearing determinations regarding which interest rate swaps and credit default swap (CDS) indices will be required to be cleared. Clearing by SDs and private funds active in the swaps market will be required in the second quarter of FY 2013. Compliance will be phased in for other market participants through the remainder of FY 2013. The CFTC is also considering clearing determinations for other classes of swaps, including agricultural, energy, and equity indices.

Based on completed real-time reporting rules, the public began on December 31 to benefit from seeing the price and volume of each Interest Rate (IRS) and Credit Default (CDS) swap transaction. Additional reporting will be phased in over the next several months.

The CFTC is also working to finalize reforms that promote pre-trade transparency, including rules on minimum block sizes and trading platforms called swap execution facilities (SEFs). Market participant compliance for these rules also will be phased in throughout the year.

As of the first week of January 2013, 66 SDs had registered with the CFTC and will come under comprehensive oversight, including standards for sales practices, record-keeping, and business conduct.

The CFTC is collaborating on a global approach to margin requirements for uncleared swaps through the Basel Committee on Banking Supervision and IOSCO. In coordination with domestic prudential regulators and international regulators, the CFTC is looking to take up final rules on margin and related rules on capital in 2013.

In consultation with international regulators, the Commission will move to finalize guidance on the cross-border application of swaps market reform and an accompanying release on phased-compliance for foreign SDs.

Customer Protection

Measures taken so far on customer protection have been significant, but market events this year have further highlighted that the Commission must do everything within its authorities and resources to strengthen oversight programs and the protection of customers and their funds. In the fall of 2012, the Commission sought public comment on further enhancements to protect customer funds. This proposal is about ensuring customers have confidence that the funds they post as margin or collateral are fully segregated and protected. The proposal, which the CFTC looks forward to finalizing in the coming months, would strengthen the controls around customer funds at FCMs. It also would set new regulatory accounting requirements that would provide stronger protections for customer money held by FCMs and would raise minimum standards for independent public accountants who audit FCMs.

Benchmark Interest Rates

Photo showing Office of Data and Technology staff in a meeting. Photo by Clark Day Photography

One of the most critical challenges for the markets, international regulators, and the CFTC is how best to ensure benchmark rates, such as the London Interbank Offered Rate (LIBOR), are honest and reliable. As they are a key component of financial markets, they must work for the rest of the economy. LIBOR is the reference rate for nearly half of U.S. adjustable-rate mortgages; for about 70 percent of the U.S. futures market; and for a majority of U.S. swaps market.

The CFTC is consulting with a number of international organizations with regard to next steps for benchmark rates. In particular, the UK Financial Services Authority (FSA) and the CFTC are co-chairing the IOSCO task force. This will include seeking public consultation, a public roundtable, and a report and recommendations in the spring.

The IOSCO task force is seeking public input on best practices that should apply to the benchmark process and entities that produce benchmarks, as well as possible mechanisms and protocols that would best ensure for a smooth transition to new benchmarks when and if needed.


< Previous page | Table of Contents | Next Page >