MINUTES OF THE U.S. COMMODITY FUTURES TRADING COMMISSION’S

DECEMBER 17, 2020 MEETING OF THE 

GLOBAL MARKETS ADVISORY COMMITTEE 

The Global Markets Advisory Committee (GMAC or Committee) convened for a public 

meeting on Monday, December 17, 2020, at 9:15 a.m., via teleconference hosted by the U.S. 

Commodity Futures Trading Commission (CFTC or Commission). The meeting consisted of 

two panels. The first panel addressed regulatory developments to advance global derivatives 

clearing. Panelists presented on a variety of topics, including the CFTC’s rulemaking

concerning registration with alternative compliance for non-U.S. derivatives clearing 

organizations, EMIR 2.2, and U.S. client access to central counterparties in the Asia-Pacific 

region. The second panel looked back at derivatives clearing in 2020, with a particular focus on 

the impact of the COVID-19 pandemic on global clearing. Panelists discussed, among other 

topics, the impact of the pandemic on clearing volume, margin requirements, and CCP 

operations. 

GMAC Members in Attendance 

Angie Karna, GMAC Chairwoman and Nomura Securities International, Inc., Managing 

Director, Legal Department and Head of Legal for Global Markets, Americas 

Chris Allen, Standard Chartered Bank, General Counsel, Clients & Products 

Ted Backer, Morgan Stanley, Global Head of Listed Derivatives Execution 

Ashely Belich, RBC Capital Markets, Head of Global OTC Derivatives & Dodd Frank Advisory 

Darcy Bradury, D.E. Shaw & Co., L.P., Managing Director 

Maria Chiodi, Credit Suisse Securities (USA) LLC, Managing Director

Clive Christison, BP, Senior Vice President Pipeline, Supply & Optimization for Fuels North 

America 

Joseph Cisewksi, Better Markets, Consultant 

Jim Colby, Coalition for Derivatives End-Users, Representative

Gerry Corcoran, R.J. O’Brien & Associates, LLC, Chairman of the Board and Chief Executive 

Officer 

Sunil Cutinho, CME Clearing, President 

David Goone, Intercontinental Exchange, Inc., Chief Strategy Officer 

Paul Hamill, Citadel Securities, Global Head of Fixed Income, Currencies and Commodities 

Amy Hong, Goldman Sachs, Head of Market Structure Strategy

John Horkan, LCH Group, Group Chief Operating Officer and Head of North America 

Adam Kansler, IHS Markit, President, Financial Services

Robert Klein, Citigroup Global Markets, Managing Director & General Counsel

Agnes Koh, Singapore Exchange Limited, Chief Risk Officer

Ben MacDonald, Bloomberg LP, Global Head of Enterprise Products & President of 

Bloomberg’s SEF and SDR

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Erik Tim Müller, Eurex Clearing AG, Chief Executive Officer 

Murray Pozmanter, DTCC, Managing Director & General Manager 

Thomas Sexton, National Futures Association, President & Chief Executive Officer 

Jessica Sohl, HC Technologies, Partner & President 

Thane Twiggs, Cargill Risk Management, Chief Compliance Officer

Supurna VedBrat, BlackRock, Managing Director & Global Head of Trading

Masahiro Yamada, JP Morgan Securities, LLC, Managing Director & Head of America’s Cross

Asset Structuring 

CFTC Commissioners and Staff in Attendance 

Dawn D. Stump, Commissioner and GMAC Sponsor

Heath Tarbert, Chairman

Rostin Behnam, Commissioner

Dan Berkovitz, Commissioner

Brian D. Quintenz, Commissioner 

Andrée Goldsmith, GMAC Designated Federal Officer (DFO)

August Imholtz, Special Counsel, Clearing Policy Branch, Division of Clearing and Risk

Abigail Knauff, Special Counsel, Clearing Policy Branch, Division of Clearing and Risk

Sayee Srinivasan, Deputy Director, Risk Surveillance Branch, Division of Clearing & Risk

Invited Speakers in Attendance 

Sean Downey, Executive Director, Clearing, Risk, & Capital Policy, CME Group 

Patrick Pearson, Head of Financial Markets Infrastructure, Directorate-General for Financial 

Stability, Financial Services and Capital Markets Union, European Commission 

Nicholas Rustad, Chairman, Board of Directors, FIA

Dmitrij Senko, Chief Risk Officer, Member of the Executive Board, Eurex Clearing AG 

Nagaoka Takashi, Deputy Commissioner for International Affairs, Japan Financial Services 

Agency 

I. Opening Remarks 

Ms. Goldsmith called the meeting to order. 

Commissioner Stump then gave her opening remarks, welcoming and thanking all who 

were attending. She discussed the GMAC’s contributions to the CFTC’s work. For example, at 

the last meeting, the Committee’s discussion focused on the Commission’s need to better align 

its global regulatory expectations for margin requirements on transactions not subject to central 

clearing. Since then, the Commission has acted on a number of recommendations received from 

the Committee, and continues to consider the GMAC’s other recommendations which came up 

from the Subcommittee on Margin Requirements for Non-Cleared Swaps. Following this, she 

stated that the focus of this meeting would be to advance clearing in the global derivatives 

markets. She then introduced the two panels, stating that they would focus on (1) the regulatory 

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developments affecting the global clearing system, and (2) a look back at global derivatives 

clearing over the course of 2020, with a focus on the impact of COVID-19. 

Next, Chairman Tarbert gave his opening remarks. He stated that many of the 

Commission’s achievements were built on the great work of the GMAC under Commissioner 

Stump’s leadership. He stated the Committee was critical in advancing important ideas 

involving central counterparties (CCPs), clearing more generally, and related issues affecting the 

global markets. He thanked all on the GMAC for their service. 

Commissioner Quintenz then thanked Ms. Goldsmith for her leadership on the staff level, 

and also thanked Commissioner Stump. He highlighted how the GMAC meetings have focused 

on topics of critical importance to the Commission and the markets, and how the GMAC 

meetings have informed certain actions that the Commission has taken. He stated he was 

looking forward to the panels and that they would address the key issues of home country 

deference surrounding CCP recognition, examination, and resiliency, while acknowledging that 

the Commission’s regime is based on intermediaries, infrastructure, and registration. 

Then, Commissioner Behnam specifically thanked Ms. Goldsmith, Commissioner Stump, 

Ms. Karna, and all members of the GMAC for their hard work. He highlighted the two main 

purposes of today’s meeting as evaluating clearing in 2020 and planning for the future. 

Finally, Commissioner Berkovitz echoed the statements of the other Commissioners and 

stated that the Committee’s work reflects excellence in government decision-making and public 

participation. He thanked Commissioner Stump for her leadership and the Committee for 

providing recommendations that are useful to the CFTC and further the objective of 

harmonization and liquidity in global markets. He also thanked Ms. Karna and Ms. Goldsmith 

for their contributions. 

II. Panel I: Regulatory Developments to Advance Global Derivatives Clearing

Ms. Goldsmith introduced the first panel. Mr. Imholtz and Ms. Knauff gave the first 

presentation on the CFTC’s recent rulemaking concerning registration with alternative 

compliance for non-U.S. derivatives clearing organizations (DCOs). Mr. Imholtz began by 

stating that in this rulemaking, the Commission amended its regulations to provide a second 

registration option for non-U.S. DCOs that clear swaps for U.S. persons, including for futures 

commission merchant (FCM) customers, if those DCOs meet certain eligibility criteria. He 

explained that there were two primary considerations that drove this rulemaking. First, the 

Commission recognized the existence of regulatory overlap for non-U.S. DCOs. Second the 

Commission recognized that there are significant differences in the extent to which non-U.S. 

DCOs clear swaps for U.S. persons. 

Under the rulemaking, a non-U.S. DCO will be eligible for registration with alternative 

compliance if the DCO is in good regulatory standing in its home country, there is a 

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memorandum of understanding in place between the Commission and the home country 

regulator, the Commission determines that the DCO’s compliance with its home country

regulatory regime will satisfy the DCO core principles in the Commodity Exchange Act, and the 

DCO does not pose a substantial risk to the U.S. financial system. The Commission may 

determine that a non-U.S. DCO poses substantial risk to the U.S. financial system if: 1) the DCO 

holds 20 percent or more of the required initial margin of U.S. clearing members for swaps 

across all registered and exempt DCOs, and 2) 20 percent or more of the initial margin 

requirements for swaps at that DCO is from U.S. clearing members. In such circumstances, the 

Commission could determine that the DCO is not eligible for registration with alternative 

compliance. 

Ms. Knauff then presented on the regulatory requirements and procedures associated with 

the alternative compliance framework. She highlighted two notable differences between the 

alternative compliance framework and the original registration framework. First, those DCOs 

subject to the alternative compliance framework could comply with the DCO core principles 

through compliance with the applicable legal requirements in their home country. Second, the 

Commission has exempted these DCOs from the rule submission requirement in Part 40, with 

the exceptions of rule filings related to customer protection and swap data reporting. All 

registered DCOs, including those DCOs registered under the alternative compliance framework, 

must comply with the Part 45 swap data reporting requirements, the Commission’s customer 

protection regime regulations, and those requirements which are designed to protect the safety of 

funds and assets belonging to clearing members and their customers. If the home country 

regulatory regime lacks legal requirements that could correspond to a particular core principle, 

the applicant will need to explain how it would satisfy that core principle. The order for 

registration for DCOs registered under the alternative compliance framework will contain 

conditions that it must comply with, and these DCOs will have periodic and event-specific 

reporting requirements. The Commission shall also retain the discretion to modify the terms and 

conditions of alternative compliance. 

Ms. Karna then introduced the next panelist, Mr. Pearson, who presented on the 

finalization of EMIR 2.2. He discussed how, just like the CFTC, the European Union (EU) has 

been looking at how to consider risk posed by non-EU CCPs operating in their markets. The EU 

identified specific risks that would be relevant in determining if a CCP from outside Europe 

could operate in their markets. These include the nature of the transactions cleared (in particular, 

the complexity, risk profile, and maturity of the transactions), the effect of a failure or disruption 

of a third-country CCP on the stability of the EU’s financial markets, the structure of a CCP’s

membership (in particular, the level of transparency and diversity of membership), the extent to 

which a CCP’s business would involve trades denominated in the Euro or in other EU currencies, 

whether there would be alternative CCPs offering similar services to those offered by a non-EU 

CCP in the European markets, and how exposed EU participants and clients would be to a thirdcountry CCP 

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Mr. Pearson stated that they also learned a great deal from the CFTC and other 

regulators in determining the EU framework for third-country CCPs. What they learned 

informed their decision to include quantitative thresholds for determining whether a thirdcountry CCP would pose a systemic risk to the European Union. Mr. Pearson explained that, 

with regard to those CCPs that are not deemed systemically important in the EU, the EU will 

continue to apply full mutual recognition and deference. On the other hand, for third-country 

CCPs that are deemed systemically important in the EU, there are certain additional requirements 

that must be met in order for the CCP to continue operating in the EU. Mr. Pearson explained 

that the EU has not identified any U.S. DCOs as systemically important in the EU. He also 

stated that the European Commission has set up a new supervisory authority within ESMA to 

apply and implement the new rules and requirements. 

Ms. Karna then introduced Mr. Nagaoka. Mr. Nagaoka stated that the past year and 

volatility related to COVID-19 have reconfirmed the importance of the role CCPs play within the 

financial system. Mr. Nagaoka noted that, as part of the Japanese presidency of the G20, market 

fragmentation was one of the top priorities, and that Japan has been working through IOSCO to 

identify sound practices regarding deference of regulation and supervision between jurisdictions. 

IOSCO’s market fragmentation follow-up group published a report in June 2020 that included 

best practices to mitigate such fragmentation. 

Next, Mr. Nagaoka discussed Japan’s initiatives regarding foreign CCPs. Japan has a

two-tier system for allowing foreign CCPs to operate their clearing business in Japan. Generally, 

foreign CCPs are required to obtain a license prior to their operation in Japan. However, there is 

also an exemption system where foreign CCPs may be exempted from licensing if a default by 

that CCP would have a minor impact on Japan’s capital market. With regard to licensing, the 

requirements applicable to foreign CCPs are more lenient than those applicable to domestic 

CCPs. With regard to the exemption framework, Japan recently made some revisions to the 

framework to allow exemptions to be granted without time limitation, on the condition that 

cooperation arrangements are in place with the exempted CCP’s regulator. The revisions to the 

exemption system were based on deference to the foreign CCP’s home jurisdiction. They have 

resulted in enhanced accessibility to Japanese markets, and have provided market participants 

with additional ways to risk manage. In regard to the CFTC’s finalized exempt DCO rule, he

also emphasized the importance of continued discussion on whether to allow exempt DCOs to 

clear swaps for U.S. customers. 

Ms. Karna next opened the floor for questions. Among other items, topics discussed 

included: whether the varying approaches to regulatory deference were sound, whether the 

regulators went far enough in allowing a home country regulator to take the primary role in 

supervising the CCPs in their own jurisdiction, the level of protection offered by the Japanese 

client money-protection regime for U.S clients clearing in Japan, the hurdles in determining 

whether a non-Japanese CCP would get full registration in Japan as opposed to an exemption, 

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and the manner in which clearing requirements are distinguished for CCPs abroad with regard to 

OTC swaps as opposed to futures. 

III. Derivatives Clearing: 2020 in Review 

Ms. Karna then introduced the next panel, which included a series of presentations on the 

impact of the coronavirus pandemic on global clearing. 

Mr. Rustad was introduced and presented a clearing member’s perspective on CCP 

margin requirements during the market volatility caused by the pandemic. He explained that the 

cleared derivatives market withstood the shock during the market volatility due to post-crisis 

reforms, including with regard to central clearing and counterparty risk management. 

Nevertheless, Mr. Rustad stated that three areas could be improved further. First, the 

procyclicality of CCP margining requirements contributed to the overall level of stress in the 

financial markets. Second, the steep and rapid increase in CCP initial margin requirements 

created funding pressures on FCMs and their clients. Third, unscheduled intraday margins were 

hard to predict and sometimes not transparent, making it hard to plan in advance. He discussed 

the data at length and emphasized that while each clearing member is responsible for the risk 

they bring, there is still a need to ensure that appropriate levels of margin are set for the industry 

as a whole. He stated that two or three margin breaches per contract per year should generally be 

expected, but that there was much more than that at the start of the pandemic. According to Mr. 

Rustad, the level of margin increases during the spring volatility was too great, and therefore 

margin either started too low or ended up too high. One solution to this issue could be to set 

appropriate margin floors, so that margin does not fall too low during quieter times. He 

suggested that margin methodologies be further reviewed to see if they could be strengthened, 

and that margin frameworks be further back-tested to test the potential for a large and sudden 

increase in margin requirements. He also suggested that the framework for intraday calls should 

be revisited and offered a number of potential improvements for the framework, including that 

routine intraday calls be made at the same time every day, intraday calls should clearly separate 

initial margin and variation margin, and ad hoc intraday calls should be made on a limited basis. 

Ms. Karna then introduced Mr. Downey. He agreed with the notion that central clearing 

performed very well during the COVID-19 pandemic stress, that the key measure to examine is 

aggregate margin changes during this time period, and that it is very unlikely we will see another 

event like this during our lifetime. He detailed the CME’s analysis regarding the COVID-19 

pandemic stress. The CME emphasized the importance of targeted anti-procyclicality measures 

in CCP risk management. He also noted that clearing members could have met their obligations 

in U.S. treasuries if they needed cash for other purposes, and that there was not a dash-for-cash at 

the CME. 

Mr. Karna then introduced Mr. Senko, who provided Eurex Clearing’s perspective on the 

crisis. From Eurex’s perspective, 2020 was an important year where the financial architecture 

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that was designed in 2010 was put to the test. He suggested there was onsensus to back test 

data in-depth to assess the best trajectory of margins and that Eurex wo ld be happy to contribute 

to this discussion. 

Mr. Karna then introduced Mr. Srinivasan to discuss some of th initial thoughts of the 

Commission's staff on the pandemic-induced market volatility. Mr. Sr ·vasan stressed that his 

group is still analyzing the data and had not reached any conclusions. e began by giving an 

overview of the Risk Surveillance Branch's three functions: margin m del oversight, assessing 

margin model performance, and doing a qualitative assessment for mar in models. He stated 

that in his group's review so far, his team did see some account-level b aches, but that they 

were fairly small in number. In looking at these account-level breaches they did not find 

anything that would be adverse to the clearing member or CCP. Additi nally, the staff examined 

whether CCPs' margin models were too reactive to the shock, and whet er margin calls caused 

stress in the funding markets and stress among the participants. He dis ssed some of the data 

reviewed so far, but stressed that the review is still ongoing. 

Ms. Karna next opened the floor for questions. Among other ite s, topics discussed 

included: the relative percentage change in open interest and the resulf g increased margin 

requirements and whether that was due to a change in the composition the market participants, 

the problems posed by looking at margins as a percentage of notional v lue, and potential issues 

with comparisons between the global financial crisis and the pandemic. 

IV. Closing Remarks

In closing, Commissioner Stump, Chairman Tarbert, and the re ·rung Commissioners 

all expressed enthusiasm for the excellent discussion and stated they we e looking forward to 

future discussions. 

Ms. Goldsmith adjourned the meeting at 12:08 p.m. 

Angie Karna 

GMACC:r 

Date 

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