U.S. Commodity Futures Trading Commission (CFTC) head Gary Gensler touted the benefits of “futurization” in a speech delivered at the CFTC today. Chairman Gensler used his address to note the CFTC’s shift to implementation, away from broader rule-making, and also to hint at the upcoming regulatory calendar for swaps rules.
Futurization of Swaps
Gensler’s speech took place at a public roundtable that met to discuss the ongoing “futurization” of the swaps market. Futurization implies that swaps are becoming more like futures and securities in terms of reporting, oversight, and market access via regulatory changes that require clearing.
From Gensler’s address:
For the first time, the public will benefit from the greater access to the markets and the risk reduction that comes with central clearing. Required clearing of interest rate and credit index swaps between financial entities begins in March.
For the first time, the public is benefiting from seeing the price and volume of each swap transaction. This post-trade transparency builds upon what has worked for decades in the futures and securities markets. The new swaps market information is available free of charge on a website, like a modern-day ticker tape.
Gensler also discussed the public benefit of oversight and new rules affecting record keeping and business conduct.
For the first time, the public will benefit from specific oversight of registered swap dealers. As of the end of this week, there will be 71 provisionally registered swap dealers. They are subject to standards for sales practices, recordkeeping and business conduct to help lower risk to the economy and protect the public from fraud and manipulation.
CFTC Swaps Agenda
Gensler also noted that the CFTC is actively working on transparence rules for swap execution facilities (SEF’s).
Looking ahead, to further enhance liquidity and price competition, the CFTC must finish the pre-trade transparency rules for swap execution facilities, as well as the block rules for swaps. It is also critical that we preserve the pre-trade transparency that has been at the core of the futures market.