At the 35th Annual FIA Expo, CFTC Chair Heath P. Tarbert described five strategic goals for the CFTC and outlined action plans for each goal.
Goal: To "strengthen the resilience and integrity of . . . [the] derivatives markets while fostering their vibrancy."
Mr. Tarbert stated that the CFTC will enhance:
- Central Counterparty supervision by (ii) improving the Division of Clearing and Risk and (ii) finalizing amendments to CFTC Rule 39 ("Derivatives Clearing Organizations");
- international cooperation by (i) deferring to non-U.S. regulators, if deference is granted in return, (ii) facilitating an open dialogue with the European Commission and European Securities and Markets Authority (or "ESMA"), (iii) introducing a cross-border swaps proposal and (iv) applying fraud and manipulation standards as to U.S. activity (see previous coverage);
- margin and capital regulation by (i) examining margin models to ensure that enough margin is in the system, (ii) publishing a swap dealer capital rule proposal and (iii) assessing the impact of the Basel rules on the markets; and
- market structure by proposing, for example, a restriction on the name-give-up practice that will not harm liquidity.
Goal: To "regulate . . . [the] derivatives markets to promote the interests of all Americans."
Mr. Tarbert said, the CFTC will:
- focus more on the agriculture sector, calling it the "cornerstone" of the Commodity Exchange Act;
- propose a position limits rule that will provide "prophylactic, clear, and usable" limits on market participants while ensuring that "bona fide" hedging is not restricted;
- treat Main Street institutions according to their needs, as opposed to the needs of Wall Street institutions; and
- increase customer protection by amending CFTC Rule 160 and Rule 190 to codify bankruptcy standards.
Goal: To "encourage market innovation and enhance the regulatory experience for market participants at home and abroad."
Mr. Tarbert urged:
- a renewal of the agency's principles-based regulation where appropriate;
- SEC-CFTC coordination, to ensure that the agencies are not "duplicating" related regulations;
- the elimination of rules that do not have a "current regulatory purpose"; and
- the development of a principles-based approach that allows the United States to lead in the innovation of "21st-century" commodity products (e.g., digital assets).
Goal: To "be tough on those who break the rules."
Mr. Tarbert said the CFTC will:
- focus on "getting people to follow the rules" rather than solely on punishing them;
- reduce fines for those who self-report, cooperate and remediate; and
- coordinate with other agencies (e.g., the DOJ, FBI and SEC).
Goal: To "focus on . . . [the CFTC's] unique mission and improve[] . . . operational effectiveness."
Mr. Tarbert called for:
- cost-effectiveness concerning budget and funds allocation;
- increasing "diverse" talent; and
- protecting American intellectual property by enhancing data analysis and protection.
In addition, Mr. Tarbert announced that the CFTC "will restrict no-action letters to those instances where we need a temporary fix or there's something very specific that doesn't lend itself to a general rule."
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