The US Commodity Futures Trading Commission held a public meeting of its Market Risk Advisory Committee (MRAC) on 13 July, via teleconference.
At the meeting, the MRAC adopted two final reports from the Central Counterparty (CCP) Risk and Governance Subcommittee. The subcommittee was established in December 2019. And is co-chaired by FIA board member Alicia Crighton, global co-head of futures and head of OTC and prime clearing businesses at Goldman Sachs, and Lee Betsill, the managing director and chief risk officer at CME Group.
The reports adopted by the MRAC, and submitted to the CFTC for consideration and potential action, include consensus recommendations agreed upon by derivatives clearing organizations (DCOs), clearing members, and end-users. The reports also identified topics in which the members of the CCP Risk and Governance Subcommittee could not reach agreement.
The first report on capital and skin–in-the-game was adopted by a vote of 28 ayes, 0 nays, and 3 abstentions. The second report on stress testing and liquidity was adopted by a vote of 29 ayes, 0 nays, and 2 abstentions.
“The reports provide a glimpse into the areas of discussion that took place throughout the last one and a half years, and given the considerable diversity of views represented by the MRAC, I recognize that there is still much left to be done” Acting CFTC Chairman Rostin Behnam noted in his public statement. “I am committed to continuing an open and fulsome dialogue on these issues.”
Also of note, Commissioner Dawn Stump said in her opening statement at the MRAC meeting that there is a need to "get clearing access right" by allowing US customers to access non-US clearinghouses. "US market participants cannot fulfill the clearing obligations we demand if they cannot access clearing infrastructure around the world. In my opinion, clearing mandates and clearing access are undeniably linked," she said.
MRAC adopts SOFR First recommendation
During the public meeting, the MRAC also adopted unanimously a recommendation from the Interest Rate Benchmark Reform Subcommittee for a market best practice that prioritizes derivatives trading in the Secured Overnight Financing Rate (SOFR) for certain market segments, otherwise known as SOFR First.
Acting Chairman Behnam stated “in anticipation of the end of LIBOR and its replacement with SOFR, my plan is to have staff present the Commission with a rule proposal addressing mandatory clearing of SOFR swaps, with the expectation of finalization in 2022.”
Official statements and documents
- Archived webcast and agenda
- Opening Statement of Acting Chairman Rostin Behnam
- Statement of Commissioner Dawn D. Stump
- MRAC SOFR First Recommendation
- MRAC CRG Capital and SITG Final Paper
- MRAC CRG Stress Testing and Liquidity Final Paper
- Benchmark Reform
- CCP Recovery and Resolution
- CCP Risk