CFTC Commissioner Giancarlo Releases Swaps Trading Rules White Paper

CFTC Commissioner J. Christopher Giancarlo released a white paper titled “Pro-Reform Reconsideration of the CFTC Swaps Trading Rules: Return to Dodd-Frank” (the “White Paper”), which proposes an alternative to the CFTC’s swaps trading framework.

The White Paper is critical of the implementation of the swaps trading framework, asserting that there is a “fundamental mismatch” between the CFTC’s framework and the “distinct liquidity and trading dynamics of the global swaps market.” According to the White Paper, the CFTC framework is “highly over-engineered, disproportionately modeled on the U.S. futures market and biased against both human discretion and technological innovation.” 

The White Paper identifies a number of adverse consequences of the “flawed” swaps trading rules, and proposes an alternative swaps trading framework that “better aligns with swaps market dynamics and is more true to congressional intent.” The alternative framework is built upon five tenets:

  • “comprehensiveness,” by subjecting the broadest range of U.S. swaps trading activity to CFTC oversight;
  • “cohesiveness,” by removing “artificial segmentation” of swaps trading and regulating all CFTC swaps trading in a holistic fashion;
  • “flexibility,” by permitting trade execution through “any means of interstate commerce” and allowing “organic development of swaps products and market structure”;
  • “professionalism,” by establishing requirements for product and market knowledge through requiring, for example, swaps broker testing, as well as requirements for professionalism and ethical behavior for swaps market personnel; and
  • increased transparency.

See: Pro-Reform Reconsideration of the CFTC Swaps Trading Rules: Return to Dodd-Frank” by Commissioner Giancarlo; Commissioner Giancarlo’s TabbFORUM Speech; CFTC Press Release.