CFTC Market Risk Advisory Committee Meets - The Industry Spread

Michael Volpe

After spending a decade in finance, Michael Volpe has been a freelance investigative journalist since 2009. His work has been published locally in the Chicago Reader, Chicago Crusader, Chicago Heights Patch, and New City. Nationally, Volpe's work has appeared in a wide variety of publications including the Washington Examiner, the Daily Caller, Crime Magazine, the Southern Christian Leadership Conference Newsletter, and Counter Punch. Volpe has been recognized by whistleblowers as leading the charge in getting their stories out. His first book Prosecutors Gone Wild was published in October 2012, his second book The Definitive Dossier of PTSD in Whistleblowers was published in February 2013 and his third book Bullied to Death was published in August 2015.

CFTC Market Risk Advisory Committee Meets

December 6, 2018

Federal Reserve SystemThe Markets Risk Advisor Committee (MRAC) of the Commodities Futures Trading Commission (CFTC) met and announced the formation and chair of a new sub-committee.

The MRAC met on December 4, 2018, for its most recent committee meeting where the committee was going to discuss “clearing and vendor risk management.”

CFTC Commission Rostin Behnan is the chair of this committee and in his opening statement he made this announcement about a new sub-committee and its new chair.

“Today’s agenda begins with Tom Wipf, Vice Chairman of Institutional Securities at Morgan Stanley and our newly appointed Chairman of the Interest Rate Benchmark Reform Subcommittee.  Tom has more than forty years of experience as an industry leader and has served in multiple capacities at Morgan Stanley in New York, London, and Tokyo.” Behan stated in his opening remarks.“Over the years, he has held several key roles at the U.S. Treasury, the Federal Reserve Bank of New York, and currently serves as a member of the Alternative Reference Rates Committee (‘ARRC’) of the Board of Governors of the Federal Reserve System (‘Federal Reserve Board’), which will be particularly relevant to his role as the Subcommittee Chairman.

“The last meeting of the MRAC in July introduced benchmark reform as a key topic of interest not only to MRAC members, but also to anyone who has a car or small business loan, student loan, mortgage, or credit card. As highlighted by Chairman Giancarlo in remarks last week at the 2018 Financial Stability Conference, despite huge improvements in the governance process to produce LIBOR, the market for unsecured inter-bank term lending that underlies LIBOR has dried up, and the regulatory mandate compelling LIBOR submissions has an expiration date. Fortunately, there are coordinated initiatives underway specifically targeted at addressing the myriad of impending issues specifically related to the derivatives market.  Chief among these initiatives is the ARRC, which is tasked with leading and directing the transition away from LIBOR to SOFR, the Secured Overnight Financing Rate.”

Tom Wipf, Vice Chairman of Institutional Securities at Morgan Stanley
Tom Wipf, Vice Chairman of Institutional Securities at Morgan Stanley

The SOFR, or secured overnight financing rate, was created by the ARRC, or Alternative Rate Reform Committee, which was created after the LIBOR trade fixing scandal.

The SOFR was supposed to compete and hopefully replace LIBOR as a market driven overnight rate.

The SOFR went live in April 2018, by May the CME created a SOFR future, and in July, the first SOFR swap was traded.

As The Industry Spread has exclusively been reporting, in October 2018, Chairman Giancarlo announced that with a full slate of commissioners the committees of the CFTC would be fully functional.

There are six committees on the CFTC.

Since that pronouncement, The Industry Spread has taken its own deep dive and found that in many cases the committees are out of date or have not held hearings in years; this is not true of the Market Risk Advisory Committee.

It has continued to hold hearings regularly and this was the third of three scheduled meetings for 2018.

That committee is a who’s who of industry heavyweights and this most recent hearing was an example.

According to the agenda, there were several items up for debate:

  • Clearinghouse Risk Management and Governance Today
  • Non-Default Losses in Recovery and Resolution
  • Central Counterparty Resolution, Leverage Ratio, and Incentives to Clear
  • Oversight of Third-Party Service Providers and Vendor Risk Management

The entire meeting was approximately six hours long and The Industry Spread will follow up on clearinghouse risk management in an upcoming article; for now, the meeting was another who’s who of industry heavyweights.

Speakers included:

  • Salman Banaei, Executive Director, Global Head of Clearance and Settlement, IHS Markit
  • Lazaro Barreiro, Director for Governance and Operational Risk Policy, Office of the Comptroller of the Currency
  • Sayee Srinivasan, Deputy Director, Risk Surveillance, Division of Clearing and Risk, CFTC
  • Marcus Stanley, Policy Director, Americans for Financial Reform
  • Robert Wasserman, Chief Counsel, Division of Clearing and Risk, CFTC
  • Biswarup Chatterjee, Managing Director, Co-Head Electronic Trading & Automated Market Making, Global Spread Products, Citigroup
  • Teo Floor, Systemic Risk Policy Advisor, Eurex Clearing AG
  • Eileen Kiely, Managing Director, BlackRock
  • Dennis McLaughlin, Chief Risk Officer, LCH Group Limited
  • Eric Nield, General Counsel, ICE Clear Credit, LLC
  • Lee Betsill, Managing Director and Chief Risk Officer, CME Group
  • Alicia Crighton, Chief Operating Officer, Prime Services, US Clearing, Goldman Sachs, Representing the Futures Industry Association
  • Dale Michaels, Executive Vice President, Financial Risk Management, The Options Clearing Corporation
  • Marnie Rosenberg, Managing Director and Global Head of Clearinghouse Risk & Strategy, JP Morgan Chase & Co
  • Lindsey Hopkins of the Minneapolis Grain Exchange

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