CFTC Commissioner Dawn D. Stump reviewed post-financial crisis derivatives reforms and described their effect on current markets. In an address before the non-profit organization Women in Housing and Finance, Commissioner Stump reviewed the Dodd-Frank Act regulatory framework which resulted in the "exponential" growth in the agency's authority. She said the CFTC now "oversee[s] a $400 trillion marketplace including both futures and swaps."
Central Clearing. Ms. Stump called the adoption of central clearing "remarkable" and said that the infrastructure and its function have withstood market volatility. Ms. Stump urged the CFTC to recognize the "global nature" of markets through alignment with and deference to regulators in other jurisdictions.
Capital. Ms. Stump said more robust capital obligations must be adopted carefully, and that they should not be taken "at the expense of well-functioning markets and deterioration of available counterparties and liquidity." She said that market trends suggested that bank capital constraints "likely curtailed banks' ability to provide [funding through Treasury repurchase transactions]."
Reporting. Ms. Stump urged ongoing review of reporting requirements, emphasizing the costs of these requirements. She stated that they have yet to meet the CFTC's goal of providing regulators with a precise understanding of swaps market activity. To improve reporting regulations, she recommended limiting the reporting of swap data elements to those that have "a proven use-case or demonstrated utility to justify their inclusion."
Data Security. Ms. Stump is leading the new Data Protection Initiative at the CFTC. She said that as a result of the constant threat of data security breaches, regulators must be able to fully comprehend the scope of data intake needs while also being aware of the potential for unauthorized access. Ms. Stump said that markets and regulators could benefit from "a more structured process and uniform policies and procedures" regarding the collection, protection, and disposal of data.
Potential of Diversity and Inclusion. Ms. Stump noted the importance of "attracting and retaining female leaders for the benefit of our economy." She cited recent studies by the McKinsey Global Institute and S&P Global, and argued that "increasing both entry and retention of women . . . could present a growth opportunity for the world's principal economy and the potential to add five to ten percent to nominal GDP within a few decades."
Originally published July 10, 2020.
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