CFTC Nominee Reaffirms SWAPs Stance

The Commodities Futures Trading Commission (CFTC) is getting a new leader but their position on SWAP equivalency will not change. CFTC Chair Christopher Giancarlo will have his term expire in April. President Donald Trump has nominated Dr. Heath Tarbert to replace him. Dr. Tarbert faced off with the Senate Agriculture Committee which holds hearings for all CFTC nominees.

J. Christopher Giancarlo
J. Christopher Giancarlo

In the hearing, the Senate Agriculture Committee Chair Pat Roberts, a Republican from the State of Kansas, asked this question.

“Senator State now and I wrote to Chair Giancarlo last year raising serious concern about the EU’s legislation to regulate our US clearinghouses. I understand legislation is about to be finalized and that the EU continues to push for directly regulating financial markets within our borders. In our letter, we stated we would encourage the CFTC to take stock of the regulatory relief it has granted to foreign countries- pardon me foreign entities- in light of the EU’s proposed aggressive action. Could you please tell the status of the EU clearinghouse equivalence issue as you see it as well as the status of the equivalence for trading venues and what Congress can do, if anything, to ensure that the CFTC remains the exclusive regulator of our US derivatives markets?”

Dr. Heath Tarbert
Dr. Heath Tarbert

“I want to be very clear on this. I agree with you wholeheartedly, that our clearinghouses and exchanges need to be exclusively supervised and regulated by US regulators.” Dr. Tarbert stated. “Again, I go to the very point that you raised, that it’s very important that the United States have the jurisdiction and sovereignty to regulate its own markets.”

Senator Debbie Stabenow (referred to in Roberts question) is from the State of Michigan and she is the ranking member- head of the minority- on this committee.

This issue first exploded in 2017 when, with Brexit taking hold, EU regulators suggested that they wanted to review and approve SWAP transactions not only in Britain, when Brexit was completed, but even suggested in the US.

Giancarlo has stated repeatedly that the US considers this a violation of it sovereignty and will not allow foreign regulators to also examine US transactions. He also mentioned that this could lead to a standoff; if the US does not allow for EU regulators to approve US SWAP transactions, these same EU regulators could turn around and bar US SWAP dealers from trading in Europe.

Dr. Tarbert, the presumptive CFTC Chair, comes to the position with a wealth of experience. He is currently the Assistant Secretary for the US Treasury for International Markets and Investment Policy. He holds both a Juris Doctorate of Science and a law degree which qualifies him for the Dr. title. He has also worked in all three branches of government- the legislative, executive, and judicial branch. He was previously a law clear for US Supreme Court Justice Clarence Thomas, he was the special counsel for the US Senate Banking, Housing and Urban Affairs Committee, and he was at the US Department of Justice. He was a partner in the law firm, Weil Gotshal & Manges,

He referred to his wealth of experience in his opening remarks.

“Over the course of my career, I have had the privilege of working in all three branches of the federal government. During that time, I have developed a broad and deep background in the financial services field and the federal agencies and international bodies that regulate it. During the last year and a half, I have served as Assistant Secretary of the Treasury for International Markets, a role in which I have managed and led 12 different offices within the Treasury Department’s international division. I have represented the United States at the G-20, the Financial Stability Board, the World Bank, and other international bodies. I have negotiated several trade, regulatory, and other agreements aimed at leveling the global playing field for American workers and families. I also serve as the policy chair for the interagency Committee on Foreign Investment in the United States, where I oversee the review process for the hundreds of cases filed annually to ensure that acquisitions of U.S. businesses do not threaten our national security.

republicans vs democrats
Republicans vs Democrats

“These experiences have highlighted for me the importance of working collaboratively across federal agencies, political party lines, and national boundaries to ensure our nation’s overall economic health and to advance the best interests of the American people. In testifying before Congress last year on the importance of attracting foreign investment while maintaining our national security, I emphasized that these aims are ‘the exclusive concern of neither Republicans nor Democrats’ and are ‘truly American aims that transcend party lines.’”

The Senate Agriculture Committee will soon vote on his nomination before it moves to the full Senate, both votes are expected to pass.