Citi 2018 FinReg Outlook

US: KEEP IT SIMPLE In theUS, J. Christopher Giancarlo, thenew head of the Commodity Futures Trading Commission (CFTC), has initiated “Project KISS,” which stands for “Keep It Simple, Stupid.” Project KISS seeks to review the CFTC rulebook looking for areas where rules can be modernized and simplified. Chair Giancarlo has indicated the CFTC will assess the unintended consequences of US OTC regulations, such as market fragmentation and reduced liquidity, to see what changes may be needed. Additionally, he has stated he would like to see the CFTC shift from a prescriptive rules-based approach to a more flexible principles-based one. The CFTC will focus on three key areas of the OTC regulations: Refine the stress testing program of central clearing counterparties, and review whether they represent a systemic risk. In keeping with the desire to move to a principles-based approach, the CFTC may liberalize the rules to enable swap execution facilities to decide their own business models, to allow for some tailoring of swap products. Improve data reporting and look for ways to harmonize regulators’ data requirements, both domestically and internationally. The CFTC has yet to propose any firm timeline for its work on the derivatives rules. However, it is likely to formally propose changes this year. As in the EU, any revisions to US derivatives rules are likely to occur in 2019. A TRANSITION PERIOD This year will be a transition period for derivatives regulation, as policymakers assess what has worked and what needs tweaking. Generally, the push to simplified and harmonized reporting will be welcomed by the industry. It is important that the industry engages with policymakers to help shape this next phase in OTC derivatives regulation. “ With the regulatory framework largely in place, policymakers are now taking a moment to assess what they have built. ” 1 2 3 Citi Custody & Fund Services – FinReg Outlook 2018 45 44