Candidate to Head Trump’s CFTC Seeks Revamp of U.S. Swaps Rules

  • Giancarlo is said to lead the race for top post under Trump
  • Giancarlo says U.S. Dodd-Frank rules caused ‘numerous harms’

J. Christopher Giancarlo, a leading candidate to head the U.S. Commodity Futures Trading Commission under President-elect Donald Trump, called for an overhaul of swaps-trading regulations that he blamed for fracturing global markets.

Giancarlo, currently a Republican member of the CFTC, said in a speech in London on Friday that Dodd-Frank Act rules have “caused numerous harms” to the $544 trillion worldwide market by driving trading away from banks and other firms that fall under U.S. oversight. He said overseas traders have shunned deals with financial firms that bear the “scarlet letters” of U.S. rules, contributing to less efficient and more volatile prices in the market.

“The time has come for the CFTC to revisit its flawed swaps trading rules to better align them to market dynamics, allow U.S. swap intermediaries to fairly compete in world markets and reverse the tide of global market fragmentation,” Giancarlo, a former swap-brokerage executive, said at an International Swaps and Derivatives Association conference.

Giancarlo cast the speech as presenting a “forward-looking agenda” for a “new regulatory environment.” A top candidate to lead the CFTC in the Trump administration, Giancarlo may also serve as its acting chairman until a permanent replacement is confirmed, people familiar with the matter said last month.

His comments show how regulators may seek to revise or reverse Dodd-Frank regulations put in place after the 2008 financial crisis. The derivatives-trading rules were one of the most contentious and heavily lobbied elements of the law’s comprehensive new oversight of the market.

In the speech, Giancarlo also said post-crisis capital rules may be contributing to increased market volatility and “flash crashes” by discouraging banks from buying, selling and holding big inventories of securities that traditionally provided a “shock absorber” during turbulent markets.

“I find it disconcerting that, rather than acknowledging and carefully studying the causes of changing market liquidity, U.S. and foreign regulators continue plowing ahead with capital constraining regulations,” he said.

— With assistance by Benjamin Bain

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