CFTC should try to change SEF regime by 2020 presidential election, Quintenz says

18 Mar 2019 12:36 pm by Neil Roland

The US Commodity Futures Trading Commission should push to alter swap execution facility rules by the November 2020 presidential election to capitalize on the pro-market bent of the current Republican majority, Commissioner Brian Quintenz said.

“We just need to be aware of the certainty that exists over the next year-and-a-half to get priorities done that for very legitimate reasons will have philosophical differences among commissioners,” he said in an interview at an industry conference last week.

“The longer we wait to take on those things, the less stable foundation they have if passed.”

Quintenz, a Republican, added: “The current SEF regime is broken. It is a patient with bandages all over its body.”

The CFTC, led by Chairman J. Christopher Giancarlo, last November proposed changes in the post-crisis derivative trading platform rules adopted during the Obama administration.

The two Democrats on the five-member commission have criticized the plan, arguing it would turn back the clock to a market dominated by big dealers and bilateral voice trading.

“The election has no bearing on the position I’ve taken,” Democratic Commissioner Dan Berkovitz said in an interview last week. “The SEF system is working pretty well.”

— Giancarlo doubles down —

Giancarlo, at the same conference, doubled down on his criticism of current rules.

“I believe the current framework is inconsistent with the Dodd-Frank Act by being too prescriptive, too burdensome and too modeled on futures markets,” he said in a speech.

Giancarlo added the regime is “overly reliant” on impermanent actions that “staff in this or a future administration less sympathetic to free markets” could change.

He has acknowledged industry objections to key parts of the proposal and expressed a willingness to review this criticism.

Giancarlo may not be around, however, to see any new rules through as his term expires in April. A replacement, Treasury official Heath Tarbert, has been nominated by President Donald Trump.

— Quintenz: ‘Open mind’ —

Quintenz said he too has “an open mind” to industry feedback.

“This is a comprehensive proposal with a lot of interacting and intersecting pieces of reforms that may be more focused on one market but have ramifications for other markets,” he said.

Quintenz expressed a desire to take enough time with rulemaking “to get it right and not just get it done.”

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