The SEC and CFTC held a joint meeting today on harmonizing dervicatives regulation between the two agencies. This effort is mandated by Congress and follows on the memorandum of understanding signed last year by the agencies.
Very arcane and interesting meeting … the issues covered are the “devils in the details”. It had the feeling of an insiders club as many meeting attendees seemed to know each other and have intimate knowledge of the rulemaking process and history. The meeting will continue tomorrow at the SEC with several more panels. (Meeting notes)
CFTC Chairman Gensler summed up the issues at the end of the meeting. Here is the “top 12″ list of open questions and the responses of the panelists of their view of the most important issues… see any patterns?
- Product approval process
- Rule approval process
- Cross and portfolio margining
- Fungibility
- Segregation and solvency
- Market structure
- Manipulation standards
- Insider trading
- Suitability vs disclosure regimes
- Fiduciary duties
- Mutual recognition
- Principles versus rules
Cleary, Gottlieb — Fungibility and national market structure, cross portfolio margining, resolution regimes
NewEdge — Margining, mutual recognition
BCG — Fungibility and market structure
TIAA-CREF — Segregation and solvency (systemic risk) cross/portfolio margining, fungibility and market structure
FINRA — Market structure, fiduciary standard
Getco — Product approval, margining, market structure
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And in Europe… market participants are threatening regulators not to overregulate because they will leave… aren’t we hearing the same song here? from Finextra…
Derivatives market players warn Commission on dangers of over-regulation
Banks and brokers active in the derivatives markets have warned the European Commission to tread carefully in regulating the over-the-counter markets for fear of stifling innovation and increasing instability.
The International Swaps and Derivatives Association, along with the Securities Industry and Financial Markets Association and the London Investment Banking Association say they “strongly support” some of the initiatives outlined by the European Commission, but caution that “hastily implemented solutions, whether voluntary or imposed, could be counter-productive”.
“We believe the regulatory focus should be on process uniformity, not product uniformity,” says Robert Pickel, executive director and CEO of Isda. “Exchange trading is not required to achieve this and it certainly would not insulate our financial system from risk or reduce losses in a challenging environment.”
The industry bodies believe the regulators should focus attention on measures to strengthen legal standards in central counterparty clearing, and on the harmonisation of close-out netting and collateral regimes across Europe.
On the creation of new central data repositories, Isda, Liba and Sifma acknowledge that they are “in principle” relevant for systemic participants, “though it is also critical that their usage does not curtail the flow of new products to the market and fully respects the global basis on which these products trade”.~~~~