Thank you to the Chairman for calling today’s open meeting, my fellow commissioners for their engagement, and the staff of the Commodity Futures Trading Commission (CFTC or Commission) for their hard work and dedication in preparing the items that we are considering today.

Notice of Proposed Rulemaking on Reporting and Information Requirements for Derivatives Clearing Organizations

I would like to start by commending the staff of the Division of Clearing and Risk (DCR) for the proposal before us today.  Over the past few years, DCR staff has noticed places where our regulations need clarification or fine-tuning.  For example, in 2020, DCR staff learned from derivatives clearing organizations (DCOs) and futures commission merchants that it was impossible for DCOs to provide to the Commission daily variation margin and cash flows by individual customer account.[1]  As a temporary remedy, DCR staff provided no-action relief while the Commission worked to consider a permanent solution.[2]  Today, we are considering a proposal that, among other things, would revise our regulations so that we no longer require that impossible reporting.

This is exactly how the process should work.

You may have noticed that I have repeatedly called on the Commission to engage in notice-and-comment rulemaking to fix its rules rather than rely on temporary, and often successive, band-aids and work-arounds such as repeated no-action letters.[3]  There are circumstances that warrant staff no-action relief.  But that relief cannot be perpetual, and it does not absolve the Commission of its responsibility.

I am pleased that today we are considering fixing unworkable rules through notice-and-comment rulemaking.  Thank you to the staff of DCR for your important role in identifying issues and proposing permanent solutions.

The proposal before us today makes additional changes to our regulations applicable to DCOs, including adding some new reporting fields for a DCO’s daily reporting requirements.  I look forward to comments on all aspects of the proposal, including these new reporting fields.

Notice of Proposed Order and Request for Comment on an Application for a Capital Comparability Determination Submitted on behalf of Nonbank Swap Dealers subject to Regulation by the Mexican Banking and Securities Commission

We are also considering today whether the capital and financial reporting regime applicable to CFTC-registered nonbank swap dealers subject to regulation by the Mexican Banking and Securities Commission is comparable to the CFTC’s swap dealer capital and financial reporting requirements, and whether those CFTC-registered nonbank swap dealers may comply with our requirements by complying with their home country’s requirements, subject to certain conditions.

Our markets are global, and international coordination and deference to comprehensive, comparable home-country regulation are essential.  Any analysis of whether one country’s regulation is comparable to another’s should be a principles-based analysis that focuses on whether each country’s regime achieves comparable outcomes to the other country’s regime.  When the G-20 leaders met in Pittsburgh in 2009 in response to the financial crisis, they recognized the global nature of the derivatives markets and explicitly committed to taking action to raise standards together so that national authorities would implement global standards consistently in a way that would ensure a level playing field and avoid fragmentation of markets, protectionism, and regulatory arbitrage.[4]  The U.S. Congress memorialized these commitments throughout the Dodd-Frank Act,[5] and the CFTC has implemented a regulatory framework that respects these commitments.

In accordance with CFTC regulations, three CFTC-registered nonbank swap dealers licensed with the Mexican Banking and Securities Commission submitted an application requesting that the Commission determine that Mexico’s capital adequacy and financial reporting requirements, and related financial recordkeeping and reporting requirements, are comparable to the corresponding CFTC regulations.

The proposed order we are considering today reflects countless hours of work by staff in our Market Participants Division (MPD).  This has been a complex and labor-intensive undertaking, and for that I express my great appreciation to the MPD staff.  I also thank the staff of the Mexican Banking and Securities Commission for their assistance.  This is the second capital comparability determination we have considered this year, and I look forward to soon considering others.

Conclusion

Thank you again to the staff members presenting today and to all the staff that had a hand in preparing for today’s open meeting behind the scenes, including others in DCR and MPD, the Office of the General Counsel, the Chief Economist’s Office, the Secretariat’s Office, the technology team, and the Logistics and Operations team.  We could not do this without each one of you.

[1] See CFTC Letter No. 21-01 (Dec. 31, 2020), available at 21-01.

[2] See id.; see also CFTC Letter No. 21-31 (Dec. 22, 2021), available at 21-31.

[3] See Statement of Commissioner Summer K. Mersinger Regarding Extension of Staff No-Action Letter 20-31 for Swaps Executed as part of Certain Package Transactions (November 9, 2022), available at Statement of Commissioner Summer K. Mersinger Regarding Extension of Staff No-Action Letter 20-31 for Swaps Executed as part of Certain Package Transactions | CFTC ; Statement of Commissioner Summer K. Mersinger Regarding Extension of Staff No-Action Letter 20-37 (October 28, 2022), available at Statement of Commissioner Summer K. Mersinger Regarding Extension of Staff No-Action Letter 20-37 | CFTC; Statement of Commissioner Summer K. Mersinger Regarding No-Action Relief to Korea Exchange (October 17, 2022), available at Statement of Commissioner Summer K. Mersinger Regarding No-Action Relief to Korea Exchange | CFTC; Statement of Commissioner Summer K. Mersinger Regarding Extension of No-Action Relief from Certain Position Aggregation Requirements under CFTC Regulation 150.4 (August 10, 2022), available at Statement of Commissioner Summer K. Mersinger Regarding Extension of No-Action Relief from Certain Position Aggregation Requirements under CFTC Regulation 150.4 | CFTC; Statement of Commissioner Summer K. Mersinger on Extension of No-Action Relief to Shanghai Clearing House (July 26, 2022), available at Statement of Commissioner Summer K. Mersinger on Extension of No-Action Relief to Shanghai Clearing House | CFTC; and Statement of Commissioner Summer K. Mersinger on Order of Registration Regarding AEGIS SEF, LLC (July 20, 2022), available at Statement of Commissioner Summer K. Mersinger on Order of Registration Regarding AEGIS SEF, LLC | CFTC. 

[4] See Leaders’ Statement from the 2009 G-20 Summit in Pittsburgh, Pa. at 7 (Sept. 24-25, 2009) (“We are committed to take action at the national and international level to raise standards together so that our national authorities implement global standards consistently in a way that ensures a level playing field and avoids fragmentation of markets, protectionism, and regulatory arbitrage”), available at https://www.fsb.org/wp-content/uploads/g20_leaders_declaration_pittsburgh_2009.pdf.

[5] Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law No. 111-203, 124 Stat. 1376 (2010).