MFA Letter to CFTC in Response to Global Markets Advisory Committee Meeting
May 10, 2019
MFA submitted comments on May 10 to the CFTC after its Global Markets Advisory Committee (GMAC) meeting on April 15. This letter addresses three main issues raised in that meeting:
First: MFA urges the CFTC and other regulators to inform their decisions around solutions for closer coordination and harmonization on cross-border regulatory reform implementation by ensuring sufficient inclusion of buy-side investor views and business impacts.
Second: MFA believes that, on the whole, the introduction of central clearing, organized trading, and greater pre- and post-trade transparency in the standardized interest rate swap and index credit default swap markets has improved – rather than fragmented – liquidity. However, market liquidity has suffered in the single-name CDS markets and other market segments where central clearing and organized trading are not as prevalent.
Third: MFA urges the CFTC and other regulators to issue specific guidance this summer under their uncleared margin rules so that Phase 5 entities, dealers, and custodians can prepare, and understand their obligations, for initial margin (IM) implementation. MFA acknowledges and appreciates CFTC Chairman Giancarlo’s recent letter to Randal Quarles at the Federal Reserve, calling for U.S. regulators to issue guidance to clarify that a U.S. regulated entity need not have compliant systems and documentation in place to exchange IM if the calculated bilateral IM amount with a counterparty is less than $50 million. MFA also suggests broader recommendations, such as exclusion of FX swaps and forwards, in calculating the Phase 5 threshold.