Big changes are happening at the CFTC: With the departure of Gensler, and the swearing-in of acting Chairman Mark Wetjen, everyone knew that there would be a change of approach. However, the scale and speed of that change has come as a surprise to many.
In fact, almost the moment Gensler stepped out of the building, the Commission issued a number of announcements, delaying parts of his controversial swaps reforms by nine months and opening a public consultation on them, marking a severe slowing-down for the CFTC’s rulemaking in this area. For many, this will be seen as inevitable and/or necessary – given the unworkability of the rules, the loss of Gensler’s ambition and the need for the SEC to be given time to catch up – but it should not be viewed, for now at least, as a relaxation of the CFTC’s overall, long-term position or as a chance for banks to put change programmes on the backburner.
To be precise, the delay applies to a very select part of the swaps rules, namely the controversial announcement last November that transaction-level requirements would apply to ‘non-US swap dealers regularly using personnel or agents located in the U.S. to arrange, negotiate, or execute a swap with a non-U.S. person.’ And, as the letter says, the delay only applies to certain transactions: transactions with counterparties other than non-US swap dealers are wholly exempted until 15 September; but transactions with non-US swap dealers are still subject to the portfolio compression and swap trading relationship requirements. Ultimately, this means more complication and more work (specifically KYC) for firms wishing to benefit from the relief.
Is this the beginning of a new, more relaxed CFTC approach to rulemaking and enforcement? We can’t say yet, not until the results of the consultation are in. But one thing is certain: Even after Gensler’s departure, firms are still being kept on their toes.