New CFTC chair sets sights on cross-border resolutions

The new chairman of the US futures market regulator has affirmed his commitment to resolving cross-border issues with Europe in his first official hearing.

The new chairman of the US futures market regulator has affirmed his commitment to resolving cross-border issues with Europe in his first US Senate hearing.

Timothy Massad joined the Commodity Futures Trading Commission (CFTC) in June at a crucial time in the regulator’s history, as it undertakes the role of reforming the US derivatives markets. 

After rolling out clearing, collateral and reporting requirements, the CFTC has hit a snag with applying its rules outside of the US leading to tensions with European regulators on cross-border rules.

“Since the day I joined the CFTC, I have been focused on cross-border issues,” said Massad. “In my first month in office I went to Europe twice to meet with my fellow regulators, and I have been engaged in on-going dialogue with them.”

A path forward between US and European regulators was struck last year, however as of yet, no agreement has been struck between the two bodies.

Massad’s CFTC has a new line-up following the departure of three commissioners in the last year, and the market will hope he can find a solution to the long-standing disparity. 

The issue around central counterparty (CCP) recognition is also a pressing matter with only a matter of months left to resolve the mutual approval of European and US clearing houses.

The Capital Requirements Directive IV (CRD IV) in Europe has imposed a deadline for recognition and authorisation of non-European clearing houses of 15 December, meaning an agreement will need to be struck before then.

“While our goal should be harmonisation, we must remember that regulation occurs through individual jurisdictions, each informed by its own legal traditions and regulatory philosophies,” added Massad. 

“Our challenge is to achieve as consistent a framework as possible while not lowering our standards simply to reach agreement, thus triggering a race to the bottom.”

Meanwhile, former CFTC commissioner, Scott O’Malia is also tackling cross-border issues in his new role at the International Swaps and Derivatives Association (ISDA).

Speaking at a conference in New York this week, O’Malia confirmed he had also spent his first weeks at the job travelling between the US and Europe dealing with cross-border issues around data and initial margin rules.

“My job is to make sure we are accountable and that we are executing in Asia, in Europe and in the US in a consistent fashion,” said O’Malia. “Everything we do has a cross-border flavor to it because we are representing market participants in all areas of the globe.”

O’Malia joined ISDA in July, around 24 hours after leaving the CFTC.

He was one of the biggest critics of the way his former employer drafted up rules on the cross-border application of its derivatives reforms.

“I have limits on what I can do interfacing with the CFTC, so I will not be dealing with them at all,” said O’Malia. “But there are a lot of things that they can draw on from this organisation for expertise. We are here to serve all regulators and all market participants.”