Swap reporting is fundamental to post-crisis financial regulation – a critical tool for promoting transparency and market integrity in swap markets that used to be opaque.  It has been a decade since the Commodity Futures Trading Commission (“CFTC”) implemented Dodd-Frank Act requirements for swap reporting.  However, in my six months of serving as a CFTC Commissioner, I have seen multiple enforcement cases involving swap reporting failures, which is troubling. 

As a market regulator, we must send a strong message that systemic swap reporting failures are unacceptable.  Swap Execution Facilities (“SEFs”) should have a culture of compliance.  I support the Commission’s enforcement action against BGC Derivative Markets, L.P., an affiliate of Cantor Fitzgerald, L.P. (“BGCD”) based on its systemic failure to report, or misreporting of, swap transactions.  But I do not support the provisions of the settlement.  I do not agree that the $1.9 million penalty combined with no admissions by BGCD in settlement is sufficient to deter future violations or provide accountability and transparency.  Therefore, I vote to concur, rather than fully support.

A higher penalty and defendant admissions to wrongdoing would serve as a stronger deterrent for BGCD and other SEFs.  Further, this case warrants the heightened accountability and transparency that comes with requiring the defendant to admit to its wrongdoing.[1] 

The CFTC should have required BGCD admissions because BGCD’s violations were egregious.  BGCD had systemic reporting problems for five years.  Because BGCD had inadequate processes and procedures for reporting swap transactions and identifying reporting issues as they arose, BGCD failed to report, or accurately report, over 16,000 swap transactions under CFTC rules intended to enhance transparency in swap markets.  BGCD took more than a year to implement a reconciliation process identified by its compliance department in March 2020 that would ensure that all transactions on the SEF were being reported. 

As the Commission’s proposed order states, “Reporting is at the heart of the Commission’s market and financial surveillance programs, which are critical to the Commission’s mission to protect market participants and promote market integrity.  Accurate swap data is essential to the effective fulfillment of the regulatory functions of the Commission, including meaningful surveillance and enforcement programs.” 

If reporting is at the heart of the Commission’s market surveillance and enforcement programs, we should take a hard stance when we find violations of our swap reporting rules.