(Adds Giancarlo's speech to ISDA, changes dateline)
By Lisa Lambert
WASHINGTON Dec 9 The U.S. derivatives regulator
will move on from reforms undertaken after the 2007-09 financial
crisis to a new focus on U.S. competitiveness and the potential
for shocks to the global $710 trillion swaps markets under
President-elect Donald Trump.
J. Christopher Giancarlo, in line to head the Commodity
Futures Trading Commission once Trump is inaugurated on Jan. 20,
has said the agency should look beyond mandates from the 2010
Dodd-Frank Wall Street reform law to current trends in financial
markets. He counts among those cyber threats, liquidity risk,
market concentration and de-globalization.
As the sole Republican on the CFTC, Giancarlo will at least
temporarily run the commission where he is currently the
Even if Trump later nominates someone else for the permanent
post, Giancarlo, who was previously an executive vice president
at GFI Group, a wholesale brokerage that runs electronic trading
platforms, will be influential in the coming months.
In a speech in London on Friday, he said regulators should
foster best practices for new trading technologies, address
diminishing liquidity, and review regulations that could cause
market fragmentation as they enter "the new year and, perhaps, a
new regulatory environment."
This week, he forced the commission to delay limits on the
positions that traders can hold on physical commodity futures
and swaps. Redrawn position limit rules are likely
to reappear in 2017, as are the following other agenda items.
KEEPING AMERICA COMPETITIVE
Giancarlo has often argued the United States should not move
too far ahead of other countries in tightening regulations
governing the swaps market, which the United States dominates.
That could put U.S. firms at a disadvantage and drive up trading
costs, he says.
In August he warned the CFTC could create a liquidity crunch
by sticking to its September deadline for implementing a new
swaps margin rule, given European regulators had delayed start
dates for their similar rules. Indeed, in September Asian swaps
markets foundered and trades fell through as the U.S. rules came
online. The CFTC then gave swap dealers an extra month to
"Championing American markets means no longer asking U.S.
market participants to go it alone and take it on the chin in
implementation of global regulatory reform," Giancarlo later
told the conservative American Enterprise Institute. "Rather, it
means standing up for America's capital and risk transfer
markets and treating them as the vital national interests that
TECHNOLOGY, TECHNOLOGY, TECHNOLOGY
Giancarlo sees the CFTC as "stuck in a 20th Century time
warp" when it comes to technology.
He can be expected to push the CFTC toward giving industry
space for breakthroughs in artificial intelligence guiding trade
execution, "smart" contracts that calculate payments and value
in real-time, and distributed ledger technology, known as
In November he voted against the "Reg AT" - Regulation
Automated Trading - to update oversight of fast computer trades,
criticizing it for not adequately protecting algorithmic
trading companies' prized source codes and being too
Giancarlo says regulators in other countries, notably
Britain, are leading the way in financial technology and the
CFTC must follow in making room to experiment.
A SMALL BUSINESS BREAK
Since 2012, any dealer with more than $8 billion in swap
activity has had to register with the Commodity Futures Trading
Commission, which subjects it to stricter federal oversight.
That activity value in dollars, known as the "de minimis"
threshold, was poised to fall to $3 billion by the end of 2017,
but the CFTC recently delayed the drop by a year.
Under Giancarlo, the threshold may never fall - or could
He has called the thresholds "made up numbers" lacking
policy justification. He also said that in general, a specific
de minimis level may not do anything to optimize "the safety,
soundness, liquidity or vibrancy of U.S. swaps markets."
In March, Giancarlo failed to launch recommendations on
regulating energy markets made by a committee he led, which was
dominated by people from the energy sector. Reform proponents
said the suggestions were sops to industry and he withdrew its
When he is in charge, Giancarlo could turn back to the
committee's work. It questioned the need for new position limits
and suggested an alternative "accountability system," where
exchanges could grant exemptions to limits.
(Reporting by Lisa Lambert; Editing by Alan Crosby and Frances