MINUT S OF TH U.S. COMMODITY FUTUR S TRADING COMMISSION’S 

MARCH 11,2021 M TING OF TH 

GLOBAL MARK TS ADVISORY COMMITT 

The Gl bal Markets Advis ry C mmittee (GMAC r C mmittee) c nvened f r a public 

meeting n Thursday, March 11, 2021, at 9:00 a.m., via telec nference h sted by the U.S. 

C mm dity Futures Trading C mmissi n (CFTC r C mmissi n). The meeting c nsisted f 

tw panels. The first panel addressed trends in retail investing and impact n gl bal derivatives 

markets. The sec nd panel l ked back at derivatives clearing in 2020, with particular f cus n 

the impact f the COVID-19 pandemic n gl bal clearing. 

GMAC Members in Attendance

Angie Kama, GMAC Chair and N mura Securities Internati nal, Inc., Managing Direct r, Legal 

Department and Flead f Legal f r Gl bal Markets, Americas 

Chris Allen, Standard Chartered Bank, General C unsel, Clients & Pr ducts

Ted Backer, M rgan Stanley, Gl bal Head f Listed Derivatives Executi n

Ashley Belich, RBC Capital Markets, Head f Gl bal OTC Derivatives & D dd Frank Advis ry 

Darcy Bradbury, D.E. Shaw & C ., L.P., Managing Direct r 

Maria Chi di, Credit Suisse Securities (USA) LLC, Managing Direct r

Jim C lby, C aliti n f r Derivatives End-Users, Representative 

Gerry C rc ran, R.J. O’Brien & Ass ciates, LLC, Chairman f the B ard and Chief Executive 

Officer 

Sunil Cutinh , CME Clearing, President 

David G ne, Interc ntinental Exchange, Inc., Chief Strategy Officer 

Paul Hamill, Citadel Securities, Gl bal Head f Fixed Inc me, Currencies and C mm dities 

J hn H rkan, LCH Gr up, Gr up Chief Operating Officer and Head f N rth America 

Adam Kansler, IHS Markit, President - Financial Services 

R bert Klein, Citigr up Gl bal Markets, Managing Direct r & General C unsel 

Agnes K h, Singap re Exchange Limited, Chief Risk Officer 

Janet K ng, BP Americas, Chief Executive Office, Trading & Shipping 

Ben MacD nald, Bl mberg LP, Gl bal Head f Enterprise Pr ducts & President f 

Bl mberg's SEF and SDR 

Erik Tim Muller, Eurex Clearing AG, Chief Executive Officer 

Murray P zmanter, DTCC, Managing Direct r & General Manager

Th mas Sext n, Nati nal Futures Ass ciati n, President & Chief Executive Officer 

Jessica S hl, HC Techn l gies, Partner & President

Thane Twiggs, Cargill Risk Management, Chief C mpliance Officer

Supurna VedBrat, BlackR ck, Managing Direct r & Gl bal Head f Trading 

Masahir Yamada, JP M rgan Securities, LLC, Managing Direct r & Head f America’s Cr ss 

Asset Structuring 

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CFTC Commissioners and Staff in Attendance 

Dawn D. Stump, C mmissi ner and GMAC Sp ns r

R stin Behnam, Acting Chairman 

Dan Berk vitz, C mmissi ner 

Brian D. Quintenz, C mmissi ner 

Andree G ldsmith, GMAC Designated Federal Officer (DFO) 

Dr. Mel Gunewardena, Chief Market Intelligence Officer, Market Intelligence Branch, Divisi n 

 f Market Oversight 

Eugene Kunda, Market Analyst, Market Intelligence Branch, Divisi n f Market Oversight 

J nathan Lave, Ass ciate Direct r. Divisi n f Market Oversight 

Invited Speakers in Attendance

Alis n Beer, Seni r Legal C unsel, Derivatives Branch, Ontari Securities C mmissi n 

Pedr Gurr l -Perez, Head f Research, W rld Federati n f Exchanges

Ulrich Karl, Head f Clearing Services, Internati nal Swaps and Derivatives Ass ciati n (ISDA) 

Nich las Linc ln, Gr up Head f Market Risk and Liquidity Risk, LCH Gr up 

I. Opening Remarks 

Ms. G ldsmith called the meeting t rder. 

C mmissi ner Stump gave her pening remarks, welc ming and thanking all wh were 

attending. She intr duced the panelists and discussed the tw -panel agenda, n ting that the 

panels w uld feature presentati ns ab ut recent trends in retail investing activity and the impact 

 f the COVID-19 pandemic n the gl bal derivatives markets. With respect t the sec nd panel, 

she stated that she h ped these meetings w uld lead t pr ductive dial gues that w uld help 

ensure that the gl bal clearing system remains resilient in the face f future market stresses. 

C mmissi ner Stump als discussed the GMAC’s c ntributi ns t the CFTC’s w rk in 

the area f margin requirements n transacti ns n t subject t central clearing. She n ted that 

the C mmissi n, as well as regulat rs ar und the w rld, have extended the c mpliance dates f 

phases 5 and phase 6 f the uncleared margin rules t September 1,2021, and September 1. 

2022, respectively. She expressed c ncerns that s me firms are n t preparing f r the 

implementati n dates and enc uraged th se firms t d s . 

Next, Acting Chairman Behnam gave his pening remarks. He stated that the GMAC 

had been phen menal during the COVID-19 crisis, particularly with regard t the discussi ns 

ar und market fragility and stability. He als thanked C mmissi ner Stump, Ms. G ldsmith, 

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and Ms. Kama f r their leadership, as well as all members f the GMAC, panelists, and 

participants f r their participati n. 

C mmissi ner Quintenz then gave his pening remarks. He thanked C mmissi ner 

Stump, Ms. G ldsmith, and Ms. Kama f r their leadership f the GMAC. He als thanked all f 

the members f their GMAC and all th se participating in the meeting. In particular, he stated 

he was l king f rward t hearing fr m the Market Intelligence Branch and stressed the 

imp rtance f its w rk. 

Finally, C mmissi ner Berk vitz thanked Ms. G ldsmith, Ms. Kama, and C mmissi ner 

Stump f r their leadership. He thanked the GMAC f r the excellent and timely agenda, the 

CFTC staff f r presenting, and als th se staff that w rked t supp rt the presentati ns. 

II. Panel I: Trends in Retail Investing and Impact on Global Derivative Markets 

Ms. G ldsmith then turned the pr gram ver t Ms. Kama, wh intr duced the first 

panel. 

Dr. Gunewardena and Mr. Kunda gave the first presentati n, which discussed data 

surr unding the recent retail investment activity and the effect f such activity in the markets that 

the CFTC versees. 

Mr. Kunda explained the gr wth f retail acc unts and stated that the daily transacti n 

v lume f U.S. futures and pti ns acr ss all exchanges has increased dramatically ver the past 

f urteen years. N tably, in the past ten years, there has been a str nger c rrelati n between 

v latility and trading v lumes, with daily trading v lumes increasing al ng with higher 

v latility. Additi nally, at the beginning f the COVID-19 pandemic in March f 2020, the 

number f retail participants trading in the derivatives markets peaked, with ver 85,000 new 

participants. In analyzing the trading data, several trading behavi ral patterns emerged. First, 

retail participants d n t typically trade regularly r unif rmly; instead, they tend t seek specific 

market pp rtunities. Sec nd, m st retail traders are sh rt-term traders. 

Dr. Gunewardena, examining the micr structure f derivative markets, stated that there 

are three specific ways futures markets are affected by a sizeable retail engagement in the 

securities markets. First, many exchange traded fund (ETF) and exchange traded n te (ETN) 

managers directly manage risk using the futures markets. Sec nd, ETF and ETN managers and 

 ther asset managers wh pr vide retail-type pr ducts use swaps t hedge their exp sure. Third, 

ETF and ETN managers may trade swap r cash markets. 

Dr. Gunewardena summarized that ver the past f urteen m nths, there was a gr wth in 

retail interest acr ss derivatives markets, fueled by easier market access (direct and indirect), 

s cial media hype, smaller and retail-friendly c ntracts, and retail-friendly terms at new and 

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existing exchanges. Despite this gr wth, he n ted that trade v lumes f retail traders are still 

relatively small, representing between 10 and 15% f t tal activity. 

Dr. Gunewardena stated that retail trading is here t stay, and will c ntinue t influence 

the futures markets. H wever, f r the retail sect r t devel p fully, he n ted that tw areas need 

enhancement. The first area t be devel ped sh uld be invest r pr tecti n, discl sures, 

educati n, suitability standards, and establishing unambigu us bligati ns n the FCMs and 

intr ducing br kers in terms f pr tecting invest rs. Sec nd, he stressed further analyzing the 

micr structure f ur markets t understand h w emerging trading strategies c uld be predat ry 

 r unfair. 

Next, Mr. Lave pr vided an verview f s me f the CFTC’s C re Principles (CPs) f r 

designated c ntract markets (DCMs) and their particular relevance t retail market participants. 

He started by n ting that, f r purp ses f his presentati n, a retail market participant is a market 

participant that is n t an eligible c ntract participant. He stated that retail participants generally 

use intermediaries like intr ducing br kers t access derivatives markets, and futures 

c mmissi n merchants t clear trades. 

Mr. Lave discussed several DCM CPs that are relevant t retail market participants. F r 

example, DCM CP 8 and its ass ciated regulati ns assist retail market trading by requiring 

DCMs t make certain inf rmati n public and specify that certain inf rmati n must be made 

available free f charge. This inf rmati n all ws retail market participants t make wellinf rmed decisi ns and ensure better functi ning markets. DCM CP 9 and its ass ciated 

regulati ns require that DCMs pr vide a c mpetitive, pen, and efficient market and mechanism 

f r executing transacti ns that pr tects the price disc very pr cess f trading in the centralized 

market f the b ard f trade. Additi nally, DCM CP 2 and its ass ciated regulati ns require 

DCMs t establish, m nit r, and enf rce rules pr hibiting abusive trade practices, and DCM CP 

12 and its ass ciated regulati ns require DCMs t establish and enf rce rules that pr tect 

markets and market participants fr m abusive practices. Finally, DCM CP 11 and its ass ciated 

regulati ns require DCMs t establish and enf rce rules and pr cedures f r ensuring the 

financial integrity f transacti ns entered n r thr ugh a DCM. 

Finally, Ms. Beer described h w the Ontari Security C mmissi n (OSC) versees 

transacti ns by retail market users and the differences in the OSC’s appr ach versus that f the 

CFTC. She stated that the OSC has witnessed a similar ev luti n ver the last decade in retail 

market participati n, and a significant rise in the number f nline trading platf rms that ffer 

derivatives pr ducts t retail invest rs. 

Ms. Beer described a c uple f the differences between the Ontari derivatives market as 

c mpared t the U.S. F r example, she n ted that retail participants can trade c ntracts f r 

difference, but that they are pr hibited fr m trading binary pti ns. There is als a much greater 

degree f c ns lidati n in Ontari markets in terms f retail dealers. 

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While much f s cial media-related trading activity has been U.S.- based, there were als 

s me Canadian securities that saw price increases as a result f s cial media activity, including 

BlackBerry. She highlighted the stark differences in v lume, with the U.S. s cial media-related, 

'■‘meme-driven” trading activity being much higher than similar Canadian trading activity. She 

stated that it c uld be inferred fr m this data that liquidity is generally f und in the U.S markets. 

In additi n, because Canadian retail traders can trade in U.S. markets, it is p ssible that added 

retail activity by Ontari traders w uld be reflected in U.S. trading v lumes. 

Ms. Beer then discussed retail invest rs’ increasing appetite f r crypt currencies. She 

stated that the OSC, al ng with the rest f the Canadian Securities Administrat rs (CSA), has 

issued crypt currency guidance anal gizing crypt assets t c mm dities and securities, and 

subjected these assets t OSC’s jurisdicti n. She n ted that ne distincti n between OSC’s 

guidance and the CFTC’s is that transacti ns d n t need t inv lve leverage t engage the 

CSA’s jurisdicti n and therwise require platf rms that are ffering these pr ducts t be 

registered as dealers. 

Ms. Kama next pened the fl r f r questi ns. Am ng ther items, t pics discussed 

included: the imp rtance f educati n f r retail invest rs, the imp rtance f retail participati n 

f r the success f futures markets, the existing pr tecti ns f r retail market participants, and the 

need f r additi nal research and analysis n the effects f the micr structure f the markets 

thr ugh intermediaries. 

[Break] 

III. Derivatives Clearing: 2020 in Review 

Ms. G ldsmith welc med all attendees back and updated the attendance rec rd. Ms. 

Kama then intr duced the next panel, a series f presentati ns n the impact f the c r navirus 

pandemic n gl bal clearing. 

Mr. Gurr l -Perez highlighted why the f cus n initial margin in the research n 

pr cyclicality is misplaced, highlighting five main p ints: 1) margin requirements are driven by 

variati n margin and n t initial margin; 2) there are unav idable trade ffs and c nstraints in 

m delling changing market c nditi ns; 3) rand mness leads t the same calibrati n, at times, 

pr ducing different utc mes under different initial c nditi ns; 4) there is a need t distinguish 

between l ng-term pr perties fr m th se that reflect market c nditi ns at a given p int in time; 

and 5) feedback l ps are amplified thr ugh system interacti ns and there is a need t l k f r 

s luti ns that address systemwide r bustness. 

Mr. Gurr l -Perez discussed examples f risk m dels based n twelve-, ten-, and neyear timespans, specifically addressing the significant market events in March f 2020 and 2008. 

He als discussed whether a margin fl r w uld be a viable way t reduce pr cyclicality, and 

n ted that there is a limit t what can be achieved by increasing the margin fl r if we want t 

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keep clearing ec n mically viable. He c ncluded by stating that initial margin m dels sh uld be 

calibrated t address pr cyclicality t the extent that it is prudent and practical, but that we need 

t l k at system-wide appr aches that l k at interdependencies and interacti ns acr ss the 

financial system in rder t better address pr cyclicality. 

Next, Mr. Linc ln dem nstrated h w LCH’s margin m del resp nded t pandemicrelated market v latility with tw specific examples, ne fr m the Eur pean cash equity market 

and the ther fr m the gl bal rates market. By stripping ut the v lume impacts, he 

dem nstrated h w b th examples sh w that activity fr m market participants was the biggest 

driver in terms f increasing the margin required by LCH. He emphasized that the impact f the 

CCP’s risk m del n the size f margin requirements during the height f the pandemic-related 

v latility was actually quite small and "unexcepti nal.” 

Finally, Mr. Karl presented a clearing member’s perspective n CCP margin 

requirements during the pandemic, including rec mmendati ns f r decreasing the pr cyclicality 

 f CCP margin calls in times f increased v latility, Overall, he stated that CCPs and their 

participants did very well during the pandemic, even with rec rd v lume and v latility. 

Mr. Karl made rec mmendati ns in tw areas. First, he suggested intr ducing measures 

t mitigate pr cyclicality. He rec mmended reviewing and recalibrating anti-pr cyclicality t ls 

s that similar pr ducts exhibit c mparable levels f pr cyclicality. He als rec mmended 

additi nal guidance n g vernance and measurement f the effectiveness f anti-pr cyclicality 

t ls, including transparent standardized measurement metrics f r these t ls. Sec nd. Mr. Karl 

suggested increasing the frequency f public quantitative discl sures. He rec mmended that 

CCPs rep rt certain data p ints fr m public quantitative discl sures, including initial margin, 

default fund, and back-testing breaches, m nthly with a ne-week time lag. He als 

rec mmended further standardizing rep rting f back-testing breaches and their calculati n. 

Ms. Kama next pened the fl r f r questi ns. Am ng ther items, t pics discussed 

included: h w CCPs can be resp nsive t risk levels, pr m ting transparency, h w t increase 

liquidity while still being resp nsive t risk, examining margin meth d l gy m dels t see h w 

they can be adjusted f r risk management, and giving clearing members additi nal inf rmati n 

regarding the c rrelati n between v latility spikes and margin requirements changing s they 

may understand this inf rmati n and prepare f r the future. 

IV. Closing Remarks 

In cl sing. Acting Chairman Behnam, C mmissi ner Stump, and the remaining 

C mmissi ners thanked all wh participated, expressed enthusiasm f r the excellent discussi n, 

and stated they were l king f rward t future discussi ns. 

Ms. G ldsmith adj urned the meeting at 11:49 a.m. EST. 

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Angie Kama 

GMAC Chair Date 

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