Statement of CFTC Chairman Timothy Massad before the Market Risk Advisory Committee

June 27, 2016

Thank you. Let me just express my appreciation to Commissioner Bowen, her staff, and the distinguished members of the Market Risk Advisory Committee for all the work that has gone into today’s meeting and its agenda. And let me also thank the staffs at the CFTC and the FDIC, and everyone else who will be participating in today’s presentations. As always, I’m very pleased to be here with Commissioner Giancarlo.

The agenda for this meeting was set some time ago and won’t include any discussion of the UK’s vote to exit the European Union, but let me just say that we have been closely monitoring our markets, and on Friday and thus far today they have functioned in an orderly manner, notwithstanding the volatility resulting from this vote. We will continue to work with exchanges and clearinghouses and other regulators and do all we can to ensure that our markets continue to function properly.

Turning to our CCP related agenda, let me begin by saying that the CFTC’s advisory committee meetings always provide a great opportunity for Commissioners and staff to hear from stakeholders about important developments in our markets and to solicit feedback on issues we may be considering. Of course, we will be benefitting from that feedback again today. For example, we will hear more about the CCP Risk Management Subcommittee’s draft recommendations to enhance coordination among clearinghouses in default management. Today’s meeting will also serve another purpose. Today, our staff—together with FDIC staff—will provide all of you here, and the public generally, with an update on a number of the important efforts taking place related to resolution planning for central counterparties (CCPs).

The FDIC will provide an overview regarding resolution of global systemically important banks or G-SIBs. This is very relevant to resolution planning for CCPs for a few reasons, in particular because many G-SIBs have futures commission merchant subsidiaries that are members of CCPs, or provide critical custodial or settlement bank services to CCPs. For these reasons, G-SIB resolution has the potential to impact the resilience of our clearinghouses.

Following that, FDIC and CFTC staff will discuss planning for the resolution of CCPs. As you will hear, a lot of progress has been made in this area at the domestic and international levels.

For example, we will hear about the international standards concerning resolution of CCPs adopted by the Financial Stability Board, as well as the relevant provisions of the Dodd-Frank Act. We will hear about the work of the FDIC together with the CFTC, to develop resolution strategies in light of that legal framework and those international standards. I very much appreciate the close and collaborative working relationship we have developed in this regard. You will also hear about the many ongoing workstreams both domestically and internationally. This includes the work being done by the Cross-Border Crisis Management Group on this topic.

We will also hear about the distinctions between resolution planning and recovery planning. But unfortunately, beyond noting those distinctions, time will not permit us to discuss all the work being done on recovery planning. Let me just say that our own staff has been extremely busy in this area, both in terms of developing strategies and standards domestically, as well as working with our counterparts internationally.

All of this reflects the priority that the CFTC is placing on what you might call the three Rs for CCPs—that’s not reading, writing and arithmetic – but rather resilience, recovery and resolution. It has been a priority of mine since taking office, and it is also a priority of regulators around the world, as evidenced by the agreement between U.S. and international regulators last year to implement a four-part workplan to examine clearinghouse resiliency standards, recovery and resolution planning, and interdependencies among clearinghouses and clearing members. I am pleased that the CFTC is leading much of this work.

And these issues are not just top of mind for the U.S. and Europe. I recently returned from a trip to Asia where I discussed these issues with regulators and clearinghouses in some detail. I also spoke at a conference in Shanghai to mark the founding of “CCP 12,” a new organization of clearinghouses focused on these issues.

So again, I think this will be a very productive meeting on issues that are critical to the health of our financial system. I again thank all the presenters for their hard work, and the members of the MRAC for being here today.

Last Updated: June 27, 2016