CFTC Commissioner Dawn D. Stump emphasized the importance of using "common sense" on pressing issues before the agency.

In an address before the ISDA Annual Legal Forum, Ms. Stump outlined common sense fixes on position limits, swap execution facilities ("SEFs"), the treatment of non-U.S. central counterparty clearing ("non-U.S. CCP"), a cross-border swap dealer rule, swap data reporting obligations, and the implementation of Phase V initial margin for uncleared swaps.

As to the position limits regime, Ms. Stump said that "common-sense principles" would include (i) utilizing "current deliverable supply information" to help create the methodology for updated positions limits, (ii) exchanges assuming an active role in the administration of the position limits regime, and (iii) regulators understanding that a one-size-fits-all approach will not work.

As to SEFs, Ms. Stump stated, instead of a "comprehensive SEF overhaul," the agency could propose more limited rulemaking by instead (i) codifying no-action and guidance letters, and (ii) addressing a "limited subset of less divisive topics" (e.g., financial resources and the registration or examination of SEF professionals).

Ms. Stump also urged the CFTC to continue to defer regulatory authority where appropriate, specifying the treatment of non-U.S. CCPs. Ms. Stump emphasized that deference "cannot be a one-way street," and that other jurisdictions must share the CFTC's commitment. She outlined policy changes to the non-U.S. CCP rule that she supports, which include:

  • allowing market participants involved in swaps to choose how and where to conduct clearing business; and
  • providing a sophisticated institutional investor with the flexibility to make a "business-driven decision" while still understanding risks based on information concerning (i) jurisdictional insolvency regimes, (ii) the role of intermediaries, (iii) the registration status of entities in the clearing workflow and (iv) customer funds protection.

Ms. Stump supported the cross-border swap dealer rule proposal, saying that it is not feasible to continue relying on the current 2013 guidance, which was designed to be temporary.

In addition, Ms. Stump advised the CFTC to consider several amendments to swap data reporting obligations, such as:

  • harmonizing regulations with the SEC and international regulators;
  • reducing the number of required reportable data elements;
  • extending the time delay for Part 45 regulatory reporting to 24 hours; and
  • reducing the regulatory burden on end users.

As to the implementation of the Phase V initial margin for uncleared swaps, Ms. Stump said that U.S. regulators should provide guidance to exclude market participants from being forced to establish documentation and systems that they may never use.

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