Sharon Y. Bowen outlined ways in which global regulators could
harmonize the regulation of market data, enforcement and clearing.
In a speech delivered at the 2017 Eurofi High-Level
Seminar, Commissioner Bowen urged global regulators to:
"remove the regulatory barriers
to data sharing across jurisdictions for the purpose of effective
market oversight" in order to prevent the next financial
globally share information about
"potential bad actors that are moving from market to market
harming customers, lessening efficiency and bringing otherwise
functional markets into disrepute"; and
address the "unfortunate
outcome" of applying a capital charge to segregated funds used
to secure cleared products that are "reducing the appeal and
viability of clearing."
Commissioner Bowen stated that:
"[w]e should not punish markets and customers for the
unpredictable decisions of a beleaguered electorate. Regulatory
fragmentation does not help anyone; systemic risk has no platform
or party. When a customer loses his life savings, it does not
matter if he is a Republican or Democrat."
Commentary / Steven Lofchie
The most notable part of the Commissioner's speech was her
criticism of the position taken by banking regulators to impose
capital charges on customers' segregated funds that are held by
CFTC-regulated entities. Her opinion on this point likely reflects
a near-unanimous consensus (leaving aside the opinions of the
banking regulators themselves). Commissioner Bowen observes that
there is some irony in the banking regulators' assertion of a
position that may seem to strengthen the banks, but in fact is
counterproductive for the system as a whole. That is an interesting
The Commission might consider whether certain other positions
advanced by the CFTC that might seem beneficial to one class of
regulated entity are, in fact, negative for the system as a whole.
There are strong arguments to be made, for example, that pushing
swaps toward central clearing creates material dangers for the
system as a whole because (i) there is no limit to the ability of
the central clearing corporations to demand margin and (ii) thus,
in the event of a market downturn, these central clearing
corporations may demand massive amounts of margin (because their
demands cannot be limited by contract), which will drain liquidity
and increase systemic risk. One may argue with this conclusion, but
it is a similar line of inquiry as the concerns raised by
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