In advance of the release of a new framework for swaps reform, CFTC Chair J. Christopher Giancarlo declared that the CFTC would return to its “historic character” as a “principles-based regulator.”
In remarks at the Sims Lecture at Vanderbilt Law School, Mr. Giancarlo stated that it is crucial for the CFTC to rely on its core principles when interpreting the application of the law. Mr. Giancarlo stated that the agency had strayed from its “principles-based” approach with respect to the swap market reforms under the Dodd-Frank Act. He confirmed that the CFTC is taking steps to improve the regulation of the swaps market. Among other initiatives, the CFTC will be releasing an improved framework known as “Swaps Reform Version 2.0.”
Mr. Giancarlo also called for the agency to continuously review past policy applications to confirm that they remain optimized for the purposes intended and to rely on its core principles in areas where legislation is outdated. As an example, Mr. Giancarlo noted that legislation has not kept pace with technology, specifically with respect to cryptocurrency. He stated: “[w]hen it comes to the challenge of crypto, it is clear that our governing statutes were not designed for this technology.”
Lofchie Comment: CFTC Chair Giancarlo’s remark that the CFTC had strayed from its prior principles-based approach is notable. The assertion permits re-examination of the CFTC’s trading rules with respect to swaps, where the details of the CFTC’s requirements arguably diverged substantially from existing market practices and have drawn criticism from both sell- and buy-side market participants.