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

OCTOBER 25,2021 MEETING OF THE

GLOBAL MARKETS ADVISORY COMMITTEE

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

meeting on Tuesday, October 25, 2021, at 8:45 a.m. (EDT), via teleconference hosted by the U.S.

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

three panels. Panel 1 provided an overview ofTreasury market structure, recent stresses in the

Treasury market, and proposals for reforms to mitigate against future stresses. Panel 2 provided a

deep-dive into a proposal to reform the U.S. Treasury market through increased central clearing of

Treasury market securities, including the benefits that an increase in central clearing might bring to

the Treasury market and how increased central clearing ofTreasuries might be implemented. Panel 

3 discussed the implementation ofrecent Dodd-Frank Act reforms, including issues related to

swap data reporting, uncleared margin, and swap dealer capital and financial reporting.

GMAC Members in Attendance

Angie Kama, GMAC Chair and Managing Director, Legal Department and Head ofLegal for 

Global Markets, Americas, Nomura Securities International, Inc.

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

Ted Backer, Global Head ofListed Derivatives Execution, Morgan Stanley

Ashley Belich, Head ofGlobal OTC Derivatives & Dodd-Frank Advisory, RBC Capital Markets

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

Gerry Corcoran, Chairman ofthe Board and ChiefExecutive Officer, R.J. O’Brien & Associates, 

LLC

Sunil Cutinho, President, CME Clearing

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

Paul Hamill, Global Head ofFixed Income, Currencies and Commodities, Citadel Securities

Amy Hong, Head ofMarket Structure Strategy, Goldman Sachs

John Horkan, Group Chief Operating Officer and Head ofNorth America, LCH Group

Adam Kansler, President- Financial Services, IHS Markit

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

Agnes Koh, ChiefRisk Officer, Singapore Exchange Limited

Janet Kong, ChiefExecutive Officer, Trading & Shipping, bp Americas

Ben MacDonald, Global Head ofEnterprise Products & President ofBloomberg’s SEF and SDR,

Bloomberg LP

Erik Tim Muller, ChiefExecutive Officer, Eurex Clearing AG (“Eurex”)

Joseph Nicosia, Global Platform Head ofCotton, Louis Dreyfus Company 

Murray Pozmanter, Managing Director & General Manager, DTCC 

Thomas Sexton, President & ChiefExecutive Officer, National Futures Association

Maggie Sklar, Senior Policy Advisor and Director ofInternational Engagement, Federal Reserve 

Bank ofChicago

Jessica Sohl, Partner & President, HC Technologies 

Thane Twiggs, ChiefCompliance Officer, Cargill Risk Management 

Supuma VedBrat, Managing Director & Global Head ofTrading, BlackRock 

Masahiro Yamada, Managing Director & Head ofAmerica’s Cross Asset Structuring, JP Morgan 

Securities LLC
CFTC Commissioners and Staff in Attendance

Commissioner Dawn D. Stump, GMAC Sponsor

Acting Chairman Rostin Behnam

Andree Goldsmith, Special Counsel, CFTC, Market Participants Division, GMAC Designated 

Federal Officer

Invited Speakers in Attendance

Sam Schulhofer-Wohl, Senior Vice President and Director ofFinancial Policy and Outreach,

Federal Reserve Bank ofChicago

Michael Pedroni, Executive Vice President and Managing Director, Head of Global Research and

Markets, Managed Funds Association (MFA)

Jennifer Han, ChiefCounsel and Head ofRegulatory Affairs, MFA 

Professor Darrell Duffie, Adams Distinguished Professor ofManagement and Professor of

Finance, Graduate School ofBusiness, Stanford University 

Graham Harper, Executive Committee Member ofthe FIA Principal Traders Group and Head of

Public Policy and Market Structure, DRW Trading Group

Laura Klimpel, General Manager, Fixed Income Clearing Corporation

Tara Kruse, Global Head ofInfrastructure, Data and Non-Cleared Margin, International Swaps and 

Derivatives Association, Inc. (ISDA)

Kyle Brandon, Managing Director, Head of Derivatives Policy, Securities Industry and Financial 

Markets Association (SIFMA)

Colin Lloyd, Partner, Cleary Gottlieb Steen & Hamilton, LLP

I. Opening Remarks

Ms. Goldsmith called the meeting to order. The Sponsor, Commissioner Stump,

welcomed everyone and thanked Acting Chairman Behnam, the presenters, Ms. Kama, and Ms.

Goldsmith, noting that this is Ms. Goldsmith’s last meeting. She explained that the health and

efficient functioning ofthe Treasury market is ofvital importance to the CFTC due to the 

interconnectedness between the Treasury market and the derivatives market. She also stated that

the first panel will focus on recent stresses in the U.S. Treasury market and various proposals and

recommendations that have been made to mitigate these stresses in the future. The second panel 

will dive deeper into one ofthe most discussed proposals to reform the U.S. Treasury market, 

increased central clearing. The third panel will discuss recent developments in the CFTC’s

continued implementation ofthe Dodd-Frank Act. Next, Acting Chairman Behnam stated that he

is very interested in the Treasury market discussion, not only because ofwhat we experienced in

the March-April 2020 period, but also in terms of experiences in the Treasury market and the 

relationship between cash and derivatives over the past decade and more. With regard to the 

implementation ofDodd-Frank, he stressed the importance of consistently reviewing rules and

policies so that markets function efficiently and transparently.

II. Panel 1: Treasury Market Structure and Recent Stresses

Mr. Schulhofer-Wohl covered dislocations in the Treasury market stemming from the 

March 2020 pandemic and September 2019 repo market pressures, noting that in both cases there

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was insufficient supply ofliquidity to meet demand. In March 2020, financial markets reacted 

with severe volatility, and after an initial flight to safety into Treasuries, the highly uncertain 

circumstances caused broad-based and rapid sales ofTreasuries. Many market participants sold

Treasury securities to obtain cash and cash-like assets. Some market participants were motivated 

to unwind positions when the markets became too volatile. Precautionary concerns amplified 

initial sales in order to guard against the risk that markets would deteriorate further. As a result, 

there was a dramatic increase in the demand for intermediation, and bid-ask spreads and other 

measures ofliquidity reached the worst levels since the global financial crisis. In September 

2019, rate pressures in repo rates spilled over to other money markets, such as federal funds.

Although the dynamics ofthis event differ from March 2020, in both cases supply and demand 

for liquidity did not adjust enough to keep the price ofliquidity from soaring. To mitigate against 

future stresses, there have been calls to increase public dissemination ofmarket data and address 

gaps in data for the cash and repo markets as well as calls for more central clearing in the

Treasury market. There are also suggestions to reconsider how Treasury trading venues are

regulated. For example, the U.S. Securities and Exchange Commission (SEC) has proposed 

extending Regulations ATS and SCI to alternative trading systems (ATSs) for government 

securities.

Mr. Pedroni focused on the attributes ofthe Treasury markets that should inform any

policy reforms going forward. Treasuries are not a uniform market, and the various segments of

the Treasury market (i.e., on the runs, offthe runs, cheapest to deliver issues, and futures)

performed differently in response to the COVID shock. Surprise shock from COVID prompted

heavy redemptions and an overseas dash for dollars. Treasury markets rely on multiple 

participants, notjust traditional dealers, for liquidity. Repo financing relies heavily on bilateral 

relationships. Because ofthese attributes, expanded clearing options, including for repos, should 

be explored as part ofthe solution to modernizing Treasury markets. During the dash for dollars

in March 2020, the sellers were from non-U.S. official accounts (34 percent), foreign private 

accounts (29 percent), mutual funds (31 percent), and hedge funds (6 percent). Foreign central

bank selling was a major source ofturmoil during the pandemic. The early narrative ofthe

pandemic volatility was that hedge fund basis sellers were engaged in fire sales which caused the 

volatility, but the evidence ofthis is weak. Hedge fund basis traders appear to have been actually 

supporting the liquidity in these markets. Hedge funds hold about 25 percent oftheir investing 

assets in cash as a precaution in case ofvolatile times.

Ms. Han shared four recommendations to enhance the liquidity and functioning ofthe 

Treasury markets even in times ofshock. First, central clearing solutions should be expanded.

Regulators should work together to expand the development of voluntary central clearing.

Second, targeted enhancements should be made to regulatory data collection. Third, public 

dissemination ofpost-trade transaction data should be carefully introduced. Fourth, trading 

venue oversight should be rationalized (e.g., MFA recommends that the SEC extend Reg ATS to

alternative trading systems that trade government securities or repo or reverse-repo agreements 

on government securities and examine other electronic trading venues).

Ms. Kama opened the floor for questions and comments. Ms. Vedbrat said that central

clearing improves market resiliency, and recommended that consideration be given to expanding 

the types of eligible collateral and enhance the ability for clients to net collateral posted. She

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suggested that very liquid assets, beyond what is already accepted as collateral, might include

various liquid ETFs and money market funds. She asked whether the clearing solutions being 

discussed include both on the run and offthe run Treasuries. Mr. Pedroni said that the market 

would benefit significantly from central clearing ofoffthe run Treasuries, as that is an area 

where clearing solutions are currently very limited. Mr. Yamada asked whether holders of on the 

run and offthe run Treasuries should be consulted regarding dissemination oftheir trade data.

Mr. Pedroni responded that the idea in post-trade transparency is to disseminate aggregate 

anonymized information or the anonymized information on a transaction, so users ofthat data 

have access to price and quantity, but not to who conducted a trade. Ms. Han added that MFA 

advocates for a careful and calibrated approach to data dissemination.

[Break]

III. Panel 2: Clearing in the Treasury Market

Professor Duffie explained that bid-offer spreads widened dramatically in the Treasury 

market related to the March 2020 pandemic, and many market participants had trouble getting 

liquidity. While it is sometimes said that the Fed can fix this situation, it took several weeks,

despite Fed actions, before bid-offer spreads returned to normal. Central clearing has several

benefits which may address this problem, including lowering the commitments of dealers and

freeing up their balance sheets. Dealer balance sheets have been more constrained since the 

financial crisis, while the Treasury market expands greatly, which is unsustainable. Central

clearing dramatically reduces settlement commitments, lowers counterparty risk, increases

transparency, and reduces settlement failures by freeing up dealer balance sheets. The FIA paper

by principal trading firms (PTFs) suggests that there are ways to get to broader central clearing 

without a regulatory mandate, or if a mandate is needed, without causing undue costs or worsening 

market performance.

Mr. Harper discussed the benefits of central clearing, but noted that obstacles to voluntary 

clearing exist and issues would need to be resolved prior to any mandates being implemented. He

stressed that achieving more central clearing requires implementing a client clearing model at

Fixed Income Clearing Corporation (FICC) that all market participants can access and utilize.

Currently the vast majority ofTreasury clearing at FICC is done by direct members, not through 

client clearing. Irrespective of asset class, most market participants access central clearing through

a client clearing model. In sponsored clearing, clearing members are permitted by FICC to elect to

only accept transactions that are executed with them. This means market participants are unable to

locate a clearing member to clear their entire portfolio across execution counterparties. FIA PTG 

recommends that FICC implement enhancements to its client clearing offering to make it available 

to all market participants by removing the ability ofsponsoring clearing members to discriminate 

based on execution counterparty and by requiring clearing members to operate independently from 

affiliated trading businesses when deciding whether to offer clearing services. FICC should permit

both direct clearing members and clients to utilize cross-margining arrangements on fair and nondiscriminatory terms and ensure clients are adequately represented in CCP governance processes.

Ms. Klimpel agreed with the benefits ofincreasing central clearing in the Treasury 

market covered by prior panelists, but added that mitigation offire sale risk should be a top

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priority. FICC agrees that Treasury markets require viable client clearing models for market 

participants that either cannot or choose not to become direct members ofFICC, but that being 

said, what the prior presentation characterized as material limitations in six client clearing

models FICC would characterize as options. She explained that in the correspondent clearer 

model and prime brokerage models, the underlying client does not become an FICC member, 

thus FICC only has obligations to the correspondent clearer or prime broker itself. This allows

FICC to net the margin associated with the activity in the core clearers or prime brokers account,

including across clients, which generally reduces margin costs for the clearing intermediary and

may benefit the client. Ifmarket participants and their clearing intermediaries value the benefits 

ofnovation to and credit intermediation by FICC more, they might elect the sponsored clearing 

model instead. As FIA PTG notes, FICC permits transactions of a sponsored member client to be 

executed either with the sponsoring member itself or with a third-party. FICC believes it is

essential that it retain all ofthe client clearing models that it currently has as the array ofmarket 

participants in the Treasury market is very diverse, such that a singular model would not work 

and would disenfranchise many market participants. That said, there is more work to do to

ensure the viability of client clearing at FICC in connection with a potential clearing mandate.

We need to improve the efficiency of cross margining between cash and derivatives, and FICC

hopes to rollout an enhanced model by June 2022. A public-private partnership will be required 

with regard to the treatment ofmargins posted by a client. Clearing intermediaries at FICC are

not permitted to rehypothecate client margin without reserving commensurate funds which 

makes it challenging to offer client clearing oftreasuries at scale.

Ms. Kama opened the floor for questions and comments. Topics discussed, among others,

included cross-margining; whether central clearing would have relieved the supply imbalance that

caused volatility in March 2020 and reduced market stress and settlement failures and freed up

balance sheets; whether FICC has analyzed the capital levels that would be necessary for increased 

clearing to be offered; whether when a trade goes to FICC, the original counterparties have residual 

risk to one another, particularly in the event of default; the inability to have electronic trading 

without central clearing and the importance oflinking execution oftrading with large scale

clearing; and how to address the suggestion in the FIA paper that it is problematic when a clearing 

member is also the dealer due to conflicts ofinterest.

[Break]

IV. Panel 3: Dodd-Frank Implementation

Ms. Kruse gave an overview ofthe changes to CFTC swap data recordkeeping and

reporting requirements and real-time reporting requirements, noting that the amended versions of

these mles significantly overhauled the list ofrequired reportable data elements with a clear 

intention to improve the quality and consistency ofthe data available to the CFTC. The majority 

ofthe changes to the data elements are based on a published list of critical data elements (CDE)

published by CPMI and IOSCO. The CFTC publication of a separate technical specification is

helping the industry understand with greater precision, the definition, allowable values, and

formats for each data element. Swap data repositories and market participants are working to

reconcile inconsistencies between the technical specification and the rules to inform their

technical builds. The updated final version ofthe technical specification was published on

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September 30, 2021, and each SDR will need to provide updated final messaging specifications 

and counterparties will need to build corresponding changes to their logic with only seven

months before the go-live date. Ms. Kruse also discussed implementation challenges, including 

the difficulty ofthree different implementation dates—one for amended CFTC reporting 

requirements, a second to report a unique product identifier, and a third once the ISO 2022

standard has been updated to incorporate CFTC-specific data fields. The major challenge with 

implementing the trade reporting requirements in a consistent, accurate manner has always been 

the need for parties to translate what is in the written rules into internal code that produces the

message sent to their SDR. This is a global challenge and is being addressed by ISDA with 

active collaboration ofmarket participants who are contributing their knowledge and coding

skills to develop mutualized, open source code for trade reporting through the Digital Regulatory 

Reporting Initiative (DRR). The DRR is currently prioritizing the CFTC’s amended rules since

they have the earliest compliance date, and it can then be extended and harmonized as other 

jurisdictions finalize their amended rule sets. With regard to block trades, she encouraged the 

Commission to study the 67 percent block threshold and 75 percent cap threshold methodology, 

and consider the potential impact of an increased shift in block and cap thresholds on trading.

Mr. Lloyd noted that an exemption or no-action relieffrom the reporting requirements has 

been extended to non-U.S. swap dealers since 2013 for certain cross-border swaps that have a 

relatively weak U.S. nexus, but no-action reliefis due to expire on December 1, 2022. The purpose 

ofreliefwas to provide additional time for data sharing arrangements with local regulatory 

authorities to be put in place so that the CFTC can move forward on comparability determinations, 

but it is not clear that the period before relief expires is sufficient to put these arrangements in place.

He suggested that the topic needs to be on the CFTC’s agenda to avoid market disruptions.

Ms. Kruse moved on to uncleared margin, noting that the actions ofthe Commission and

other regulators to split the final phase ofinitial margin (IM) implementation into two phases—

Phases 5 and 6—and to defer those phases for a year following the onset ofthe COVID-19

pandemic provided valuable time for Phase 5 entities to prepare for compliance. The Phase 5

compliance date of September 1, 2021, has come and gone without notable impact. As the number

ofPhase 6 relationships is expected to be doubled out ofPhase 5, it is a safe prediction that there 

will be major backlogs and bottlenecks. She explained why IM preparation is more challenging for 

Phase 5 than it was for Phases 1 to 4 and why those challenges would be exacerbated for Phase 6.

She highlighted three areas which posed significant challenge for Phase 6: custodial onboarding,

separately managed accounts, and automation. She also highlighted some opportunities that Phase 6

entities and their counterparties can leverage to help ease the glide path to September 1st. Finally,

she discussed the report ofthe GMAC Subcommittee on Margin Requirements for Non-Cleared 

Swaps, which had been approved by the GMAC and included recommendations on initial margin 

requirements. The Commission acted on some ofthese recommendations, and she encouraged the

Commission to consider addressing other recommendations in the report that would provide 

meaningful assistance for Phase 5 and 6 firms.

Ms. Brandon discussed a joint CFTC-SEC request for comment on potential ways to

implement portfolio margining ofuncleared swaps and non-cleared security-based swaps. She

noted that once security-based swap dealer (SBSD) registration rules apply, non-bank swap

dealer/security-based swap dealers (SD-SBSDs) subject to separate and different margin and

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segregation regimes will be at a disadvantage to bank SD-SBSDs, and the market as a whole will 

experience increased liquidity, settlement, and operational risks. Portfolio margining would, by 

ameliorating these issues, offer benefits to both market participants and securities and derivatives 

markets. SIFMA agrees with the CFTC and SEC that any portfolio margining arrangement 

should consider customer protection, financial stability, and regulatory objectives undergirding 

their respective margin and segregation requirements. Regarding cross-border issues ofthe

CFTC capital rule, she stated that the CFTC included an option for U.S. and non-U.S. swap

dealers to rely on bank-based approaches that are generally consistent with Basel capital

standards for bank holding companies, in addition to an SEC-style net capital approach. She

stated that ifthe CFTC believes the otherjurisdiction’s requirements are lacking in a specific 

identifiable way, it should base any deemed necessary condition on the home country financial 

reporting and capital regime, rather than on U.S. style information and calculations. Regarding 

financial reporting for non-U.S. bank swap dealers, she stated that CFTC Letter No. 21-18 allows 

non-U.S. bank swap dealers in G20 jurisdictions subject to Basel capital standards to follow 

home country capital and financial reporting standards. The relief expires on the earlier of

October 6, 2023 or superseding CFTC action, and SIFMA looks forward to engaging with CFTC

staff on any permanent reliefthat is proposed.

Mr. Lloyd discussed three implementation issues in conjunction with the recent October 

6th compliance date from the Commission’s capital rules for non-bank swap dealers. First, the 

requirement that a non-bank swap dealer maintain capital equal to some percentage ofits

uncleared swap margin amount presents significant implementation issues because the systems

and processes many firms use to calculate initial margin requirements are only set up to apply to

those relationships that are in scope for initial margin, but the requirement also extends to other 

open positions. Second, some dual registrants with the CFTC and SEC are electing an approach 

under SEC rules called the alternative compliance mechanism, which provides them with relief

from various SEC capital and other financial responsibility rules on the condition that they 

comply with parallel CFTC rules with regard to not only to their CFTC-regulated swaps

business, but also their security-based swap business. While this framework makes sense for 

situations where the CFTC has a more significant regulatory interest due to the firm’s limited 

security-based swap business, a number of questions remain regarding how this will be

administered in practice. Third, regarding the ability of non-bank swap dealers to use internal

models to compute market and credit risk charges for capital, the model review process is a 

significant undertaking, both for firms and NFA staff, and for many firms there was not 

sufficient time to complete the process which has led to the need for relief.

Ms. Kama opened the floor for questions and comments. Ms. Kong suggested that the

CFTC examine the potential costs and time needed for U.S. non-bank swap dealers to implement 

the initial margin and model validation rules, which is challenging given the current timeline.

Ms. Belich stated that compounding the issues on implementation ofCFTC and other trade 

reporting requirements is that many jurisdictions outside the U.S. look to CFTC rulemaking and

guidance for rewriting their own rales. This is important from the standpoint of coding and

interpretation of complex technical scenarios and iffirms face these issues from a U.S.

perspective, they would face similar issues in their home country, potentially causing 

fragmentation. She added that data integrity isjust as important to firms from a reporting 

standpoint as it is to regulators and market participants. Mr. Twiggs stated that not only non7
V. Closing Remarks

The Sponsor noted that with regard to the Treasury market, the impact ofpost-fmancial 

crisis reforms on liquidity providers cannot be ignored. Dealers’ balance sheets are more

constrained and are affected by new regulatory capital requirements, and yet the Treasury market

continues to grow, so considerations need to be in that context. She recognizes that some ofthe

potential paths forward involve other oversight bodies, but the implication for the derivatives 

markets makes it necessary for the CFTC to engage, and today’s meeting will better enable it to

do that. She added that issues should be looked at dynamically and CFTC rules updated as

needed. She recommended that immediate attention be given to substituted compliance 

determinations for swap data reporting. Regarding block trade threshold rules, she continues to

believe CFTC would benefit from publishing the calculated block sizes with the new categories 

and holding a roundtable or hearing. She also stated that the CFTC should focus on making the

swap dealer capital and uncleared margin rules more workable. She closed by thanking everyone 

for their participation. The meeting was adjourned at 12:10 p.m (EDT).

I hereby certify that the foregoing minutes are accurate.

bank, foreign entities have difficulty with the capital rules, but also U.S. non-bank swap dealers.

Date

GMAC Chair

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