United States: Derivatives Regulation In The New Administration

How will derivatives regulation change in the Trump Administration? During the campaign and since the election, President-elect Trump and his advisors, as well as key Congressional Republicans and other market participants, have suggested that aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), should be rolled back, or even repealed outright. Derivatives regulation, however, has not been the focus of much of the discussion around financial regulation more generally, and some market participants have suggested that it would not necessarily be feasible or desirable to roll back the Dodd-Frank reforms completely. It will likely be some time before we have a clear sense of what changes are likely, and who will be charged with implementing them at various financial regulators. This note is intended to highlight certain areas where it seems to us that regulatory change may be more likely.

It bears remembering that Dodd-Frank itself represented a significant shift in the regulatory approach to derivatives in the United States. Previously, derivatives between institutional market participants were largely unregulated. In the wake of the financial crisis and resulting G-20 commitments, Dodd-Frank attempted to regulate comprehensively the derivatives markets, through such measures as swap dealer registration and required clearing, exchange trading, margin and reporting. Since the passage of Dodd-Frank, U.S. regulatory agencies have implemented (and continue to implement) many of these reforms, and similar reforms have been adopted in other G-20 jurisdictions. The operation and structure of the derivatives markets have fundamentally changed as a result, in ways that may not be easy to unwind. 

Certain reforms, however, remain controversial. Still others are not yet implemented, or are still in the process of implementation. The leadership of the regulatory agencies responsible for the Dodd-Frank reforms will change in the new administration, and may reconsider or halt new or expanded regulations that have not yet been implemented, or delay the timing of some reforms. In addition, regulators may also seek to not impose, or to roll back, other more controversial changes. 

  • Regulation AT. The CFTC's proposed regulations relating to high-frequency and other electronic trading, known as Regulation AT, have been controversial and criticized by many market participants. It seems likely that this regulation may be delayed, withdrawn or significantly watered down, especially regarding the most debated aspects of the proposal, such as the requirement to submit source code to the CFTC.1
  • Position Limits. The CFTC has sought for several years to impose new, more restrictive position limits on a range of commodity futures contracts, in the face of significant opposition from market participants. Such an expansion of position limits may be less likely in the new administration. Recently, the CFTC has reproposed these rules, opening up a new comment period that will extend beyond the inauguration and grant the new administration significant influence over the final version of the rule, if any.
  • Swap Dealer Threshold. Under Dodd-Frank and current CFTC regulations, the current "de minimis" exception from swap dealer registration of $8 billion is scheduled to be significantly reduced at the end of 2018 to $3 billion. It may now be more likely that the current exemption level is extended or established as the permanent threshold.
  • Regulation of Security-Based Swaps. To date, the SEC has not implemented most of the Dodd-Frank reforms relating to security-based swaps. It is not clear whether the new leadership at the SEC will be interested in completing such reforms, and if so on what timetable. At a minimum, the SEC may need to take action as exemptions previously granted from the application of the securities laws to security-based swaps expire.
  • Margin for Uncleared Swaps. Implementation of new margin requirements for uncleared swaps continues, with an upcoming March 1, 2017 deadline in the US and other major jurisdictions for required posting of variation margin in transactions with financial entities. In a recent speech, CFTC Commissioner Giancarlo called the deadline "unrealistic" and asked his fellow regulators to consider the "market's readiness and help ease the transition" to ensure the market's continuing functionality.2 In light of the numerous regulators involved, the prospects for any delay in these requirements are uncertain.
  • International Cooperation, Conflicts, and Harmonization. Dodd-Frank was enacted in the wake of the financial crisis and commitments among the G-20 countries to implement certain financial reforms. The implementation of Dodd-Frank, particularly the derivatives reforms, has generated a significant amount of conflict and complaints from other countries, and from internationally active institutions, over suggestions that the US requirements have gone too far and have an excessive extraterritorial effect. During the implementation process, there have in particular been disagreements between the US and EU over equivalence of their respective regulatory regimes and cross-border recognition of registrants. Rolling back Dodd-Frank requirements may reduce some of this conflict, but may also raise new questions as to whether US requirements are equivalent to those of other jurisdictions. It may also cause other countries to reconsider aspects of their own regulations. Market participants will worry about whether such changes undermine existing equivalence and/or substituted compliance, or will make it more difficult to obtain equivalence and/or substituted compliance in the future.
  • Resolution and Recovery. Congressional Republicans and others have suggested the repeal of Title II of Dodd-Frank, which established an "orderly liquidation authority" under which the FDIC would be authorized to wind-down systemically important institutions, outside of the normal Bankruptcy Code process. Title II reflects the U.S.'s implementation of the goal among regulators in major market jurisdictions of ensuring the orderly resolution of global systematically important financial institutions. While never used, this authority has been criticized as potentially putting taxpayers at risk of supporting "too big to fail" institutions, although that assessment is not universally shared. A related question would be whether amendments could be made to the Bankruptcy Code to facilitate bankruptcy proceedings involving large, systemically important institutions. Bank regulators in major jurisdictions have required (or proposed to require) changes in derivatives documentation to take into account stays on close-out rights under Title II and other special resolution regimes. (In the US, the banking regulators have proposed but not yet adopted rules of this type.) Market participants have developed resolution stay protocols and other documentation changes to implement such regulations. Those rules may be reconsidered under the new administration, and, accordingly, the protocols and other implementing documentation may need to be delayed or reconsidered as well. 
  • Trading Requirements. The regime for swap execution facilities, including both the regulatory requirements for such facilities and the mandatory use of such facilities for certain types of derivatives, has, in the view of many market participants, not been entirely successful. Concerns have been raised about market disruption, market fragmentation and onerous regulatory requirements, amid questions about whether the facilities achieve the goals of pre-trade transparency and greater liquidity. The new administration may seek to rethink aspects of these requirements.[3]
  • Regulation of Clearing Organizations and Financial Market Infrastructure. The regulation of clearing organizations and other financial market infrastructure has been the focus of significant attention recently in the US and abroad, in light of the requirements to clear many derivatives and concerns about concentration of risk in clearing organizations. Particular focus has been on resolution, recovery and wind-down of such institutions. It is possible the new administration will take different views on some of these issues, perhaps as part of broader consideration of "too-big-to-fail" financial institutions more generally. Although the topic has been less widely discussed, some in Congress have suggested that the Dodd-Frank authority under Title VIII for the enhanced supervision of financial market infrastructures (including clearing organizations and payment systems), as well as the access of such entities to certain Federal Reserve services, could also be reconsidered. 

New Commissioners at the Helm 

Consistent with past practice, it is expected that the leadership of the key financial regulators for the US derivatives markets, the CFTC and SEC will change. 

  • At the CFTC, current Democratic Chairman, Timothy G. Massad, has a term expiring in April 2017, and it is expected that he may step down prior to the expiration of his term. Currently, it is anticipated that the lone Republican Commissioner, J. Christopher Giancarlo, will serve as acting chair until the president nominates him or another candidate as the permanent chair. Commissioner Giancarlo has been an active critic of many of the Dodd-Frank reforms discussed above.
  • Mary Jo White, chair of the Securities and Exchange Commission (SEC), has announced that she will leave the SEC at the end of the Obama administration. Michael Piwowar, the only Republican SEC Commissioner, may become the acting chairman until a permanent chair is named.

The new administration will also have the opportunity to fill the vacant Commissioner appointments at both agencies. 


There is little clarity at this stage as to how the new administration may approach derivatives regulation. Despite the public statements about repealing or rolling back Dodd-Frank, any change in direction will be complicated by the significant implementation efforts made by regulators and market participations over the years since Dodd-Frank was adopted, which have fundamentally changed the way the derivatives markets operate. The topics noted above represent areas that may be in line for potentially significant changes. Market participants should watch these and other areas as the regulatory (or deregulatory) landscape becomes clearer and initiatives at the Congressional and agency level evolve.


1 For example, during a recent industry speech, CFTC Commissioner Giancarlo reiterated his stance that the source code provision is a "non-starter". J. Christopher Giancarlo, Commissioner, CFTC, Keynote Address before International Swaps and Derivatives Association, Inc.'s Trade Execution Legal Forum (Dec. 9, 2016).

2 Id.

3 CFTC Commissioner Giancarlo, for example, stated his view that it is time to "revisit [the] flawed swap trading rules" and "reverse the tide of global market fragmentation." Id.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.