Christopher Giancarlo, soon to be acting chairman of the US Commodity Futures Trading Commission (CFTC), says that the commission will look at ways to ease the March 1 deadline for the new margin requirements for uncleared swaps.
These requirements will make posting variation margin compulsory for all non-cleared derivatives, and set strict requirements on the type of collateral that can be posted, the frequency of the margin calls, and the required timing for settlement.
When current chairman of the CFTC, Timothy Massad, steps down from his role on January 20, Giancarlo will become acting chair and, speaking at the SefCon VII event, which was organised by Profit & Loss, in New York yesterday, he was critical of the March 1 deadline for the new margin rules.
“I am aware that market participants continue to face hard challenges in meeting this deadline. I am especially concerned that smaller firms, including American pension and retirement funds, may not be able to get their documentation done in time. If they do not, they will be abruptly forced to stop hedging their portfolios at a time of enormous changes in financial rates and global asset values.
“Unfortunately, regulators imposed an unrealistic deadline on the marketplace. Many seem intent on sticking to that March 1 deadline regardless of the effect on the health of the market and market participant,” said Giancarlo.
He went on to note that regulators in Singapore, Hong Kong and Australia have announced that their implementation of the margin rules would be subject to a six-month transition period, and claimed that this was a “well-considered” approach that could help avoid market disruption.
Giancarlo added: “As acting chairman, I also intend to look at solutions to ease the March 1st transition in a responsible manner. Look for the CFTC to have more to say about this in the weeks to come.”
The Commissioner is thought to be in the running to be named as the permanent Chairman of the CFTC, and he said that if he is given the position on a full-time basis that he will enact an agenda called “Making Market Reform Work for America”.
At SefCon VII he outlined five of the major points of this agenda, which involved providing more customer choice with regards to trade execution, improving the quality of swaps data reporting, achieving greater cross border harmonisation of financial markets regulation, encouraging fintech innovation and “cultivating a regulatory culture of forward thinking”.