Global Markets Advisory Committee February 13, 2023

Commissioner

Caroline D. Pham

Chairman

Rostin Behnam

Commissioner

Christy Goldsmith Romero

Commissioner

Kristin N. Johnson

Commissioner

Summer K. Mersinger
Global Markets Advisory Committee

OPENING REMARKS
Global Markets Advisory Committee

Keynote Speaker: The Honorable Joshua Frost, 

Assistant Secretary for Financial Markets, U.S. 

Department of the Treasury
Global Markets Advisory Committee

Keynote Speaker: Paulina Dejmek Hack, Director for General 

Affairs, Directorate-General for Financial Stability, Financial 

Services, and Capital Markets Union (DG FISMA), European 

Commission 
Global Markets Advisory Committee

PANEL I: GLOBAL MARKET STRUCTURE AND 

ACCESS TO MARKETS
Page 6

Growth of Fixed Income eTrading

Derek Kleinbauer

Global Head of Fixed Income & Equity e-Trading Product

President, Bloomberg SEF LLC

CFTC Global Markets Advisory Committee

Feb 13, 2023
Page 7

Impact Events

o Brexit

o COVID-19 Pandemic & Lockdowns

o Russian Invasion of Ukraine

o Rising Inflation Globally

o Monetary Policy Response

o Collapse of FTX
Page 8

Benefits of Electronic Trading

o Pre-trade price discovery

o Increased access to liquidity sources

o Ease of execution

o Straight-thru-processing (STP) for post trade 

efficiency

o Evolution towards automation & rules/attribute-based 

trading
Page 9

US Treasury Electronic Adoption

o Dealer to Client – Over 9% increase over the last two 

years.

o Increase in protocol utilization;

Source: Greenwich Associates
Page 10

Corporate Bond Activity

o Issuance impacting secondary market growth

o Adoption of Portfolio Trading & All-to-All trading increasing

Source: Greenwich Associates Source: Greenwich Associates
Page 11

Swap Execution Facilities

o Activity in Credit Default Swaps and Interest Rates Swaps 

responding the volatility measures within their respective asset 

classes.
Page 12

Looking Ahead

o Recommendations from MRAC

o Expansion of Execution facility rules to other asset classes

o Re-definition of Exchanges and Dealers

o Potential UST Clearing mandates

o Best Execution changes

o ESMA Trading Perimeter opinion
GLOBAL MARKET STRUCTURE AND ACCESS TO MARKETS 

JPMorgan Chase & Co.

U.S. Commodity Futures Trading Commission

Global Markets Advisory Committee

February 13, 2023
U.S. Treasury market dynamics and liquidity have changed significantly over the last 10+ years

10-Year Treasury Market Depth, 5-Day Moving Average ($mn) Sensitivity of Liquidity to Volatility During Tightening Cycles 1 2

Treasury Securities Outstanding ($tn LHS)

Primary Dealer Positions % of Treasuries Outstanding (RHS) Market Share of Automated Trading in the Interdealer Market 3 4

Sources: BrokerTec, FRB, JPM Research, SIFMA 

Note: Duration-weighted Treasury market depth; 3-month moving average, regressed on 3-

month standard deviation of daily changes in US-GBI yield (bp/day), regressions over 2016-

2018 tightening cycle and last 12 months, $mm 10-year equivalents

Note: Market depth is the sum of the three bids and offers by queue position, averaged 

between 8:30 and 10:30am daily
Disclaimer

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© 2023 JPMorgan Chase & Co. All rights reserved.

2
LIMITED DISTRIBUTION

Commodity Futures Trading Commission

Global Markets Advisory Committee

February 13, 2023

Panel I - Global Market Structure and Access To Markets 

Part I - Trading and Liquidity

Sachiyo Sakemi

Managing Director, Global Head of Legal for Global Markets Group 

BlackRock

16
Global Markets Advisory Committee

Vadim Zlotnikov, Head of Fidelity Institutional, Fidelity 

Investments
CORPORATE

February 13th, 2023

Isaac Chang, Head of Central Execution and Trading, Global Fixed Income

Panel: Global Market Structure and Access to Markets

U.S. Commodity Futures Trading Commission

Global Markets Advisory Committee 
PANEL 1

GLOBAL MARKET STRUCTURE AND ACCESS TO MARKETS

Global Markets Advisory Committee

U.S. Commodity Futures Trading Commission

Scott Fitzpatrick

CEO, Tradition SEF

February 13th, 2023
SWAP INTERMEDIATION UNDER DODD-FRANK

Congress mandated the CFTC through the Dodd-Frank Act to create and enforce rules to increase visibility and certainty in the swaps 

market as a means towards overall financial stability, which was the overriding goal of the Dodd-Frank Act in the aftermath of the 

2008 financial crisis.

The CFTC commendably implemented reforms such as swap participant and execution venue registration, mandated clearing for 

specific swaps and encouraged clearing for others, extensive transaction reporting by swap participants and venues, position 

reporting and moving as many swap transactions as possible from the opaque OTC and bilateral markets onto transparent regulated 

venues (e.g. Swap Execution Facilities “SEFs”). The CFTC’s Swap Rules reach across global jurisdictions. 

While the vast majority of the CFTC SEF Rules have been implemented without issue, certain rules have proved impracticable to

implement, or unwieldly and duplicative in the case of cross-border rules mandating US registration and execution processes in 

overseas financial centers. Most of the proposed fixes to these rule are non-controversial operational procedures that, as noted by 

current and past Commissioners*, the CFTC has extended continuous No-action relief in recognition that these rules are impracticable 

or impossible to implement.

Rules that are arguably not fit for purpose or create operational inefficiencies put SEF’s, and by extension their Participants at risk of 

non-compliance with the Rules. 

*Comments of Commissioner Pham, July 20, 2022;

*Comments of Commissioner Mersinger July 20, 2022, January 9, 2023; February 2, 2023
PRE-TRADE TRADE POST-TRADE

• Vast majority of Swaps captured

• Fn88

• MAT v Non-MAT Swaps

• Arrange and Execute

• Brokers in IB for Permitted Swaps

• Brokers in SEF for MAT Swaps

• Access requirements

• D2D v D2C

• Financial Resources

• Information gathering 

• Fn195

• Restricted trading functionality

• Order Book & RFQ

• Block Trades

• Embargo Rule

• Work-up

• “15-Second” Rule 

• Execution Rules and Protocols

• Mandatory Cleared Swaps

• Intended To Be Cleared Swaps

• Non-Cleared Swaps

• Trade Reporting

• P45, P43, P16

• STP

• Audit Trails

• Information Gathering

• Position Limits

• US Persons Nexus

• Bifurcated Liquidity Pools

• Substituted Compliance evolving

• Execution relief granted inconsistently 

• Reporting asymmetry 

• SEF = Reporting facility, not Trading facility

• Complex regulatory setup

• Duplicative operational setup

• Increased cost burden 

CROSS BORDER

SWAP INTERMEDIATION - AS IMPLEMENTED
• Impracticable rule requirements create operational risk and risk of non-compliance for 

venues and by extension participants

• Inconsistencies between SEF’s and other similar Trading Venue types

• Futures market operating models implemented in rules for OTC Swap markets

• Resulting market inefficiencies/impracticalities dealt with by NARL’s – many still in 

force

• Information asymmetry across regulatory jurisdictions

• Cross-Border implications significant

SWAP INTERMEDIATION - CHALLENGES TO BE ADDRESSED
Global Market 

Structure and Access 

to Markets

Global Markets Advisory Committee, 

U.S. Commodity Futures Trading Commission

February 13, 2023

R. J. O’Brien & Associates

Gerry Corcoran, Chairman and CEO 

James Gabriele, Chief Financial Officer

Brad Giemza, Chief Risk Officer

Heather Rucci, Chief Strategy Officer and 

CHRO
24

Impact of MMR on FCMs

 During the early stages of the Coronavirus outbreak and the Russia- Ukraine crisis, the exchanges worked to mitigate systemic risk by 

significantly increasing MMR

 The system worked as intended, helping to protect customers and allowing 

for risk transfer during extraordinarily challenging market conditions

That said – and procyclicality not withstanding – during periods of 

extreme volatility, the ability to access capital can “make or break” 

market participants

• Exchanges worked to ensure stability and that the market had appropriate liquidity to continue 

trading within established parameters – though, in the early stages liquidity challenges existed

• Market participants had to respond quickly to meet MMR, which resulted in increasing pressure 

on regulatory capital with customers and FCMs facing intense liquidity challenges
25

RJO Exchange Margin Experience
26

Our Observations

An ecosystem of FCMs is needed as 

there is a wide variety of customers 

requiring support

• Bank FCMs tend to have a broad client base and scope

• Independent FCMs tend to support more specific and/or niche areas 

of the market

Exchanges responded differently to 

extraordinary market conditions and, in 

turn, FCMs had to react accordingly to 

each set of circumstances

• Exchange A: acted proactively, aggressively and swiftly 

• Exchange B: less proactive and slower to act 

• Exchanges C and D: appeared to rely on daily models without 

adjusting for the extraordinary market events

Market volatility and higher MMR 

resulted in massive repricing event in 

the FCM community, supporting higher 

margins and safer markets overall

• MMR drives capital requirements

• FCMs evaluated relationships with clients and return on capital, and 

identified and worked to address potential exposure points/ “leaks in 

the pipes”
27

Considerations Going Forward...

Should there be a more “surgical” 

approach to margin requirements instead 

of a “one size fits all”?

Risk and margin requirements handled differently 

Should exchanges have a higher level of 

margins over a longer period to minimize 

“spikes”, market disruption and market 

risks? 

Not all participants are situated or impacted in the same way

Should there be consistent requirements 

across exchanges for when there are 

volatile markets?

Each exchange has different practices based on their own 

evaluation of risk
Singapore Exchange

Commodities | Equity Derivatives | Fixed Income | FX | Indices | Securities

Global Markets Advisory Committee,

U.S. Commodity Futures Trading Commission

Panel II: Global Market Structure and Access to Markets - Clearing -

Perspectives on key issues from central counterparties and futures

commission merchants

Agnes Koh, Chief Risk Officer

February 13, 2023
Impact of Regulatory Capital Changes on Commodities

Over the past decade, several factors such as shift in regulatory regime, falling revenue and unprecedented 

volatility appeared to have caused market participants to exit or consolidate their commodities businesses

 Multiple clearing members have limited their commodities derivatives business to only client clearing, after 

shutting down proprietary commodities derivative trading desks. This could be attributed to

• Basel 3 Standards: revised requirements have resulted in significant capital increase for Banks. Tougher

regulation focused on enhancing the market risk framework, derivative counterparty risk (SA-CCR), CVA,

minimum leverage ratio, liquidity and funding risks

• Return on Capital/Diminishing Profit: Lower return on capital on back of higher capital charge could have

prompted deployment of capital to other businesses

• Decreasing Credit Risk appetite for commodities clients
Commodities Clearing Trend in SGX-DC

 There have been a downtrend in clearing of proprietary (house origin) commodities exposure, but client 

commodities exposures have increased significantly.

• Several Bank-related Clearing Members no longer have in-house commodities trading desks. This could 

impede their ability to price and warehouse the risk during an event of default of their clients.

• In extreme events, it might impede their ability to fulfil their default management obligations to central 

counterparties where default auctions are conducted.

 Lower proprietary participation from diverse membership could have led to concentrated positions in fewer 

Clearing Members.
Trends of commodities exposure

Chart A: Proprietary (House-origin) Positions cleared by various groups of Clearing Members

Chart B: Client Positions cleared by various groups of Clearing Members
Singapore Exchange

Commodities | Equity Derivatives | Fixed Income | FX | Indices | Securities

sgx.com

This material is not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable

laws or regulations or would subject Singapore Exchange Limited (“SGX”) and/or its affiliates (collectively with SGX, the “SGX Group Companies”) to any registration or licensing requirement. This

material is not an offer or solicitation to buy or sell, nor financial advice or recommendation for any investment product. This material has been published for general circulation only. It does not

address the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a financial adviser regarding the suitability of any investment product

before investing or adopting any investmentstrategies.Use of and/or reliance on this material is entirely at the reader’s own risk. Investment products are subject to significant investmentrisks,

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is not necessarily indicative of the future or likely performance of the product. Examples (if any) provided are for illustrative purposes only. While each of the SGX Group Companies have taken

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Securities Trading Limited and Singapore Exchange Bond Trading Pte. Ltd. is an exempt financial adviser under the Financial Advisers Act 2001. The information in this material issubject to change

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incorporated into and applicable to this material. © Singapore Exchange Limited

Thank you
33

Tetsuo Otashiro

Senior Head of Global Policy and Regulation

Japan Securities Clearing Corporation

13th February 2023

Global Market Advisory Committee, 

U.S. Commodity Futures Trading Commission 

PANEL I: GLOBAL MARKET STRUCTURE AND ACCESS TO MARKETS

Part II Clearing (Perspectives on key issues from central counterparties 

and futures commission merchants)

U.S. Swap Customer access to non-U.S. Exempt DCOs
34

Background : U.S. Customer Desire for Clearing Choice in non-U.S. Markets

Higher liquidity in some non-U.S. markets (*1)

Without access to these markets, customers must trade and clear at disadvantageous 

prices compared to their non-U.S. peers(*2). In times of market stress, they may be 

exposed to even higher risks as they are unable to efficiently hedge risk in these liquid 

markets. 

*1. e.g., around 70% of yen IRS are cleared through JSCC. 

*2. e.g., JSCC is allowed to clear for swap customers in Japan, EU, UK, Switzerland, Australia, and Hong Kong 

under the relevant license.

Improved Price Efficiency

Customer Participation(*3) in swap trading across DCOs, as the prices can differ due to 

the occasional imbalances in supply and demand, has increased price efficiency and 

contained negative effects of market fragmentation.

*3. i.e., the first hedge funds started clearing at JSCC in 2018. 

Cross Margining & Unique Products

Some non-U.S. DCOs exempted from registration (“Exempt DCOs”)(*4) provide crossmargining between futures and swaps, enabling investors to manage their exposures 

in the relevant currencies more efficiently. Furthermore, some products are only 

available at Exempt DCOs in a currency’s home jurisdiction(*5). 

*4. e.g., ASX and JSCC 

*5. e.g., USD/CNH and USD/HKD Cross Currency Swaps at HKEx OTC Clear
35

Background : Difficulty for U.S. Customers to access Exempt DCOs

Legal Conflicts

• Customer swaps must be cleared only through FCMs at registered DCOs. However, to 

register, non-U.S. clearinghouses must ensure customer protections under the U.S. 

Bankruptcy Code without any regulatory deference/comparability to the home country 

regime. The same is true for FCM registration. 

• This creates unresolvable legal conflicts for some non-U.S. clearinghouses, despite 

having robust and comparable domestic bankruptcy regimes.

Onboarding Costs for FCMs

• Most major U.S. financial groups have already onboarded their non-U.S. affiliates or 

local branches as clearing members of Exempt DCOs. So, it would not be justified from 

their business perspective to additionally onboard U.S. FCMs in Exempt DCOs solely for 

swap customer clearing. 

Thus, customers who desire to expand clearing choice to Exempt DCOs(*1) inevitably 

have been rejected, absent a level playing field over their non-U.S. peers.

*1 ASX Clear (Australia), HKEx OTC Clear (Hong Kong), JSCC (Japan) and KRX (South Korea), with others going 

through the application process for exemption. They are allowed to clear U.S. clearing member (which are large 

financial groups), but not for U.S. persons that are not clearing members. 
36

However, U.S. Customers can access “foreign futures” widely under Part 30 Regime

• Exempt DCOs may clear foreign futures for customers through foreign brokers in an 

omnibus account structure carried from U.S. FCM. And subject to Part 30.10 exemption, 

clearing members of Exempt DCOs may directly clear for customers. 

• Thus, FCMs do not have to onboard at a non-U.S. clearinghouse to clear for their U.S. 

customers, with no bankruptcy legal conflicts between the U.S. and non-U.S. regimes.

• CFTC Regulation Part 30 sets forth the treatment of customer funds. 

• U.S. retail customers can access foreign futures markets widely, whereas U.S. swap 

customers, who are highly sophisticated market participants (i.e., Eligible Contract 

Participants) have limited access. 
37

Moving Forward

• Industry supported the CFTC’s efforts to establish a framework for customer clearing of 

foreign swaps through Exempt DCOs, including at the December 2020 GMAC meeting. 

In November 2020, the former Chairman and Commissioners publicly supported 

continued discussions. (*1, 2)

* 1 CFTC finalized the rules on registration with alternative compliance for non-U.S. DCO in September 2020, but 

this framework still applies the U.S. Bankruptcy Code for customer clearing, with no deference/comparability.

* 2 Release Number 8312-20 (November 18, 2020) : CFTC Unanimously Approves Final Rule for Granting 

Exemptions from Derivatives Clearing Organization Registration (86 Fed. Reg.949 (Jan.7, 2021))

• We would like to propose a solution, based on existing CFTC Part 30 regime as 

mentioned in a 2017 FIA/SIFMA whitepaper(*3), with some additional safeguards - e.g., 

customer clearing through U.S. FCMs or foreign brokers (as is the case of part 30.10), 

bankruptcy risk disclosure, mitigation of systemic risks flowing from non-U.S. markets, 

and comparability on Exempt DCO’s risk management.

* 3 Promoting U.S. Access to Non-U.S. Swaps Markets: A Roadmap to Reverse Fragmentation, Dec. 14, 2017
Cleared repo market 

development 

A European perspective

Panel I: Global Market Structure and Access to Markets

13th February 2023
Global repo market structure

Europe CCP, 16%

Europe Bilateral, 

12%

Europe Triparty, 8%

Asia CCP, 0%

Asia Bilateral, 25%

Asia Triparty, 2%

North America 

Triparty, 22%

North America 

Bilateral, 12%

North America CCP, 

3%

Differences in market structure between Europe (incl. UK) and the US 

have arisen out of a number of factors:

 government collateral landscape is fragmented across European 

states; 

 legal differences (pledge vs title transfer, NY law vs English law);

 structured securities are a material component of collateral in US 

markets; 

 higher prevalence of term repo in European markets; and

 interbank trade negotiation in Europe is increasingly via electronic repo 

trading systems followed by subsequent clearing through a CCP.

Global repo market is estimated to be c. US$15 Trn

Source: Finadium (2021)

Bank balance sheet constraints and the need for regulatory capital 

efficiencies will be the prinicipal drivers of further shifts towards cleared 

repo markets.

Uncleared Margin Rules Phase V & VI implementation (c.1,000 new 

counterparties in scope – mainly buy-side), requiring mandatory variation 

margin and initial margin exchange, has created unprecedented demand 

for liquidity management solutions (including repo), which will put further 

pressure on the management of bank's financial resources.

1. 

2. 

3. 

39
Lehman 

Brothers 2008

Sovereign Debt 

Crisis Spain 

(2012)

Sovereign Debt 

Crisis Greece 

(2011)

ECB announcement 

negative rates (2014) Brexit 

Referendum 

(2016)

ECB Tiering 

(October 2019 Start Corona 

Pandemic 

(March 2020)

EUR / USD 

Money Market 

dislocation 

(December 

2016)

Russia / Ukraine 

(March 2022)

20 day moving average / single counted // Source: ECB and Eurex Repo

Eurex's cleared repo markets continue to grow as Eurozone 

excess liquidity peaked

40
Cleared repo markets help mitigate systemic risk

Balance sheet constraints are a key driver of liquidity squeezes in the repo market. Through central clearing, balance sheet

netting can be achieved on an effectively multilateral basis, creating capacity in times of market stress.

Next-generation direct access clearing models reduce vulnerability to bank balance sheet scarcity for the buy-side and 

provide a path to all-to-all trading, without the 'shadow banking' risks of peer-to-peer alternatives.

As the nexus of all trades, a CCP provides credit intermediation for market participants, transparency to regulators, and can

simplify the operational and legal complexities of transactions.

Robust margin methodologies provide a critical line of defence, indirectly limiting excessive leverage and risk-taking. Margins 

can be assessed without yielding to the competitive pressures that can drive a race to the bottom in the bilateral market.

Comprehensive and routinely tested default management procedures can address clearing member defaults efficiently and 

expediently, and limit contagion to the wider financial sector.

41

Future outlook

CCPs are a logical single-point-of-entry for central 

bank emergency liquidity support for NBFIs in times of 

extreme market stress. 
Cleared repo markets offer diversity of market participants

Eurex's repo market participant distribution

Banks, 112

State Banks, 14

Central Banks, 5

Development Banks, 3

Public Sector, 4

Supranational, 4

Buy-side, 9 One master netting agreement gives access to repo 

markets with over 150 participants.

Central Banks, Public Sector and Supranationals 

participation has risen steadily.

Buy-side has the highest growth pipeline†, facilitated by 

innovative direct access models.

† Driven by the June 2023 expiry of the exemption for Pension Funds in the 

EU from mandatory clearing, and Uncleared Margin Rules Phases V & VI.

42
Buy-side: Eurex's direct access models for repo

• Eurex's buy-side repo business gained significant momentum with the onboarding of the largest Dutch pension fund and strong trading 

performance by existing buy-side clients, delivering a win-win for dealers and clients on the platform. 

• Strong pipeline of clients and sponsors for the Indemnified Sponsored Access Model.

Sponsored Access Model

Client types: Pension Funds, Insurance etc

Buy-side Volume Development

Sponsored Access Model with Indemnity

Client types: Hedge Funds

MTF: Multilateral Trading Facility

QCCP: Qualifying Central Counterparty

43
Market outlook

European Asset Managers and Pension Funds are driving 

strong demand and innovation in liquidity management 

solutions

 Expiry of the exemption of Pension Funds from mandatory clearing

 UMR Phases V & VI implementation 

Direct Access Models:

 provide comprehensive benefits to the buy-side through 

operational flexibility and promotion of competition among 

dealers; and 

 enable banks to offer balance sheet-efficient liquidity 

management solutions, while still maintaining strategic 

client relationships. 

Excess liquidity in the Eurozone will remain substantially 

elevated in 2023, but the uneven distribution across European 

economies may pose funding and liquidity risks

 ECB's Targeted Long Term Refinancing Operations (TLTRO), a major 

contributor to excess liquidity, will be materially wound-down by June 2023

GC Pooling®

 As the leading cash-driven repo market in Europe, it is the 

logical secured funding alternative as banks reduce their 

reliance on the TLTRO. 

 With c. 80+ active participants, the buy-side benefits from 

deep liquidity, competitive pricing and reduced 

vulnerabilities to scarce bank balance sheet capacity.

Collateral scarcity in Europe will continue in 2023

 The ECB's Asset Purchase Programme during COVID-19 materially 

impacted the free float of European sovereign HQLA, driving repo 

specialness and impairing the transmission of monetary policy. 

 Quantitative Tightening will begin in Q1 2023 at a "measured and 

predictable" pace

Special Repo

 Eurex is a leading venue for European government bond 

and SSA repo liquidity. Banks can efficiently fund their 

Specials trading via GC Pooling® trades with the buy-side.

 Buy-side can leverage the income opportunities from 

European collateral scarcity, through repoing assets into 

the Specials market. 44
Erik Tim Müller

Chief Executive Officer

Eurex Clearing AG 

Mergenthalerallee 61

65760 Eschborn

Germany
Disclaimer

© Eurex 2022

Deutsche Börse AG (“DBAG”), Clearstream Banking AG (“Clearstream”), Eurex Frankfurt AG (“Eurex”), Eurex 

Clearing AG (“Eurex Clearing”), Eurex Securities Transactions Services GmbH (“Eurex STS”) and Eurex Repo GmbH 

(“Eurex Repo”) are corporate entities and are registered under German law. Eurex Global Derivatives AG is a 

corporate entity and is registered under Swiss law. Clearstream Banking S.A. is a corporate entity and is registered 

under Luxembourg law. Eurex Frankfurt AG is the administrating and operating institution of Eurex Deutschland. 

Eurex Deutschland is in the following also referred to as the “Eurex Exchange”.

All intellectual property, proprietary and other rights and interests in this publication and the subject matter hereof 

(other than certain trademarks and service marks listed below) are owned by DBAG or its affiliates and subsidiaries or 

used under authorization by their respective owners, including, without limitation, all patent, registered design, 

copyright, trademark and service mark rights. While reasonable care has been taken in the preparation of this 

publication to provide details that are accurate and not misleading at the time of publication DBAG, Clearstream, 

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Global Markets Advisory Committee

February 13, 2023

John Horkan

LSEG Post Trade and LCH Group Chief Operating Officer and LCH Head of Americas

Panel II: Global Market Structure and Access to Markets

Part II: Clearing
GLOBAL MARKETS ADVISORY COMMITTEE

U.S. COMMODITY FUTURES TRADING COMMISSION

February 2023

GLOBAL MARKET STRUCTURE AND ACCESS TO MARKETS

Trade Reporting
Background

 2008 - DTCC Trade Information Warehouse data used by prudential regulators assessing global exposure to CDS

 2009 - G20 Commitment to report OTC derivatives (cleared and uncleared) to trade repositories

 Improve transparency

 Market abuse prevention

 Systemic risk mitigation

 2010 - Financial Stability Board (FSB) report

 “....as the data must be able to be readily aggregated on a global basis, by end of 2011 CPSS and IOSCO, ... should develop ........ (i) minimum 

data reporting requirements and standardised formats, and (ii) the methodology and mechanism for the aggregation of data on a global basis”

 2012 - CFTC first regulator to implement trade reporting and public dissemination of data

 CPMI/IOSCO issue recommendations for reporting standards

 Unique Transaction Identifiers (UTI) - Feb 2017

 Unique Product Identifiers (UPI) - Sep 2017

 Critical Data Elements (CDE) - Apr 2018

 2020 - Regulatory Oversight Committee (ROC) given governance and oversight role of UTI, UPI, CDE

 2022 – CFTC first to implement revised rules incorporating UTI and CDE with Phase one rewrite

 Implementation of these standards in other jurisdictions (and UPI by CFTC) scheduled for 2024-25 

49
Current and future state

 New and proposed rules include universal and consistent adoption of 53 of 110 CDE elements across 

jurisdictions*

 53 arguably include key economic fields that could be amalgamated, analyzed and used for systemic risk oversight

 Implementation differences could undermine the ability to amalgamate data in future e.g. 

 Transition from old to new rules could mean UTIs not included on all trades

 Trade correction differences can result in same trade reported to two different jurisdictions with different UTIs

 FX Swaps have two different UTIs for buy and sell in some jurisdictions and one in others

 CFDs in EU can be reported at either trade or transaction level and transaction only in other jurisdictions

 Differences in reporting entities booking and reporting systems lead to reporting inconsistencies

 UPI and ISO 20022 implementation could further impact the data e.g.

 Possible differences between underlying data values and those derived from UPI

 Possibility of different UPI reported by two counterparties to the same trade

 Possible differences in ISO messages and accepted values for same CDE data fields

* Analysis of CFTC, EMIR, MAS and ASIC revised rules

50
Conclusion

 Assuming the ability to amalgamate data sets from multiple global repositories remains a regulatory goal 

further cooperation amongst regulators will be needed

 ROC must be supported in respect to the consistent implementation of CPMI/IOSCO recommendations

 Impediments to amalgamation will need to be addressed e.g.

 Solve for data and implementation issues

 Ensure consistent approach to UPI and ISO implementation

 Create data sharing and governance framework (bilateral agreements or federated model?)

 Assess available amalgamation technology solutions and operators

51
GLOBAL MARKET ADVISORY COMMITTEE

U.S. COMMODITY FUTURES TRADING COMMISSION

GLOBAL MARKET STRUCTURE AND ACCESS TO MARKETS

Trade Reporting

February 2023
DR R Digital Regulatory Reporting (DRR): Facilitates Consistent Implementation

Other

Jurisdictions...

DRR

EMIR

DRR APAC

DRR

CFTC

90 %

RE

-USE

70 %

RE-USE

Industry: Compliance Costs

Regulatory & Industry Benefits Regulators: Data Aggregation

Reusable and scalable for multiple jurisdictions: centralized DRR model changes

Digitize core regulatory reporting ruleset and CPMI IOSCO recommendations only once

Facilitates consistent 

implementation of 

CPMI-IOSCO 

recommendations

Copyright © 2022 by International Swaps and Derivatives Association, Inc.
Digital Regulatory Reporting (DRR): Mutualized Representation for Reporting 

DRR: Rules as 

machineexecutable code

Internal Data

• Transaction

• Reference

Reports

D R R

Reporting Party’s 

Internal Systems 

• DRR turns trade reporting rules into machine-executable, open-access code. 

• Digitized fields can be used for submission to TRs.

• DRR is reusable for multiple jurisdictions or rule changes.

• DRR can be used before and after UPI or ISO 20022 implementation.

• Digitized representations are based on mutualized industry interpretations.

EMIR

ASIC 

Rules

MAS 

Rules

EMIR 

Refit 

Rules

CFTC 

Rewrite 

Rules

Output in 

required ISO 

20022 format

Trade Data Repositories

Copyright © 2022 by International Swaps and Derivatives Association, Inc.

DR R
• Facilitates consistent implementation of the CPMI-IOSCO recommendations across multiple 

jurisdictions. 

• Reduces inconsistencies between the way individual firms interpret and build rules.

• Time, effort, cost needed by industry to build to new or amended reporting rules is reduced.

• Improves the quality of data reported to TRs.

• Facilitates the ability of regulatory authorities to aggregate data to analyze.

Copyright © 2022 by International Swaps and Derivatives Association, Inc.

DR R Digital Regulatory Reporting (DRR): Outcomes 
Global Markets Advisory Committee

MEMBER DISCUSSION
Global Markets Advisory Committee

BREAK
Global Markets Advisory Committee

PANEL II: GLOBAL COMMODITY MARKETS 

VOLATILITY 
Commodity Market Performance

Julie Winkler

Chief Commercial Officer, CME Group

February 13, 2023

GMAC Meeting
Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be 

undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity 

Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to 

trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should 

only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any 

one trade because traders cannot expect to profit on every trade.

CME Group, the Globe Logo, CME, Globex, E-Mini, CME Direct, CME DataMine and Chicago Mercantile Exchange are trademarks of 

Chicago Mercantile Exchange Inc. CBOT is a trademark of the Board of Trade of the City of Chicago, Inc. NYMEX is a trademark of

New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other trademarks are the property of their 

respective owners.

The information within this communication has been compiled by CME Group for general purposes only. CME Group assumes no 

responsibility for any errors or omissions. Additionally, all examples in this communication are hypothetical situations, used for 

explanation purposes only, and should not be considered investment advice or the results of actual market experience. All matters 

pertaining to rules and specifications herein are made subject to and superseded by official CME, CBOT, NYMEX and COMEX rules. 

Current rules should be consulted in all cases concerning contract specifications.

Copyright © 2023 CME Group Inc. All rights reserved.

Disclaimer
CME’s ‘Super Cycle’ indicator retreats in 2023

After two years of relentless price growth, CME’s ‘super cycle’ indicator slows sharply

• Previous super cycles were linked to significant 

transformations in economic development:

1. The rapid industrialization of the U.S. (1910s)

2. The re-industrialization of Germany and Japan 

following World War II (1950s)

3. The growth in BRIC countries (early 2000s)

• The recent price rally appears to be less to do with 

a major economic transformation and more to do 

with the recovery from COVID-19, exacerbated by 

the impact on commodities of the Russian

invasion of Ukraine

• So far in 2023, economic challenges and the 

establishment of a ‘new normal’ are calming prices

Source: CME Group

*Simple monthly index based on the average performance of an equally weighted commodity basket 

consisting of COMEX Copper, HRC Steel, Cobalt; NYMEX WTI crude oil, RBOB Gasoline, NY Harbor 

ULSD, TTF Natural Gas; CBOT Soybeans and Corn, CME Lumber

Commodity Basket Index Value*
2.2

2

1.8

1.6

1.4

1.2

1

0.8

0.6

0.4

0.2

0

2/1/20222/3/20222/5/20222/7/20222/9/2022

2/11/20222/13/20222/15/20222/17/20222/19/20222/21/20222/23/20222/25/20222/27/2022

3/1/20223/3/20223/5/20223/7/20223/9/2022

3/11/20223/13/20223/15/20223/17/20223/19/20223/21/20223/23/20223/25/20223/27/20223/29/20223/31/2022

4/2/20224/4/20224/6/20224/8/2022

4/10/20224/12/2022

Option Implied Volatility

• Major increase in volatility occurred a week after invasion, primarily affecting energy and wheat markets

• As the notional value of commodities increased with rising prices, margins were increased to keep pace

• Most of the 1Q 2022 contract margin increases in commodity markets were due to price inflation

• Margins have started to decrease in some contracts as volatility and prices have subsided

30-Day Implied Volatility in Key Markets

S&P 10yr Note Crude Gold Corn Wheat

Russian Invasion

Russian invasion boosted commodity prices and volatility

Source - QuikStrike
Agricultural volatility was extreme, now calming

Russia’s invasion of Ukraine generated high prices and volatility across key agricultural markets

• Wheat prices increased over 70% from January to March; the largest options-implied wheat daily price move was 26% 

up on March 3rd (vs. a 7.1% hard limit that day)

• CME increased margins several times ahead of the invasion and during the first few weeks of the war. With expedited

approval from the CFTC, CME increased wheat price limits from 50 cents to 85 cents

• CME incorporated a mechanism in Chicago and Kansas City wheat that will allow price limits to increase during future 

volatile periods without expedited approval

0%

50%

100%

150%

200%

250%

0

0.5

1

1.5

2

2.5

1/3/2022

Percent Change (Implied Vol)

Option Implied Vol

SRW Wheat 30-Day Implied Vol

2/3/2022 3/3/2022

Percent Change Vol

0.5

1

1.5

2

2.5

3

SRW

3/11/2022 4/11/2022

Wheat Price per Bushel

SRW Wheat Front Month Early Roll Price Change 

(1/10/2022-4/06/2022)

0

1/11/2022 2/11/2022

Settle to Settle Move Implied Move Margin

Source: CME Source: QuikStrike
Energy prices remain elevated, but volatility retreats

1/10/2022 2/10/2022 3/10/2022 4/10/2022

Dollar per Barrel

An already volatile environment for energy was exacerbated by the Russian invasion

• Following the invasion, WTI prices increased over 60% from January to March highs

• WTI experienced the highest spike in implied volatility on upside price risk for more than 10 years

• CME increased margin in several increments ahead of the invasion and throughout the first few weeks of the war 

consistent with increased volatility and price

• Proactive and measured increases resulted in only a single outright breach

WTI Crude Oil Front Month Margin and Price Change 

(1/10/2022-4/06/2022)

16

14

12

10

8

6

4

2

0

Price Change Margin

Source: CME Source: QuikStrike
Global Markets Advisory Committee

Bill Bolton, CFO, Refining, Products, and Low Carbon 

Americas Trading and Shipping, bp 
Supply Chain Disruptions 

Affecting Markets

66

Joe Nicosia, Louis Dreyfus Company

Global Markets Advisory Committee Meeting

February 13, 2023
67

U.S. Cotton - Production, Domestic Consumption and Exports

Sources: National Cotton Council & USDA
U.S. Cotton - Production, Domestic Consumption and Exports

Modes of Transportation Required

 Most agricultural products are 

grown in the interior of the U.S.

 Given that we export off the 

coast, it requires coordination 

of...

o Trucks

o Chassis

o Containers

o Railroads

o Barges

o Ports

o Ocean Carriers

 Disruption to the supply

chain ultimately causes

disruption to the markets
Largest Container Exporters – Many are Ag Related 

Rank Name TEUs in 2020 Sector

1 Koch Industries 283,286 Conglomerate

2 International Paper 218,391 Paper/packaging

3 CellMark Group 191,280 Diversified

4 DeLong 156,314 Animal Feed and Grain

5 America Chung Nam 153,347 Paper and plastics recyclables

6 Louis Dreyfus 117,440 Cotton

7 International Forest Products 109,600 Packaging/paper products/pulp/forest 

products/recyclables

8 Winfibre 97,677 Paper/Recyclables

9 Scoular 93,000 Animal Feed and Grain

10 BMW of North America 74,741 Automotive goods

2021 Top 10 Container Exporters

Source: The Journal of Commerce
Total Inbound Containers: Port of Long Beach, Port of Los Angeles,

& Georgia Ports Authority

U.S. Imports Surged as the U.S. Emerged from COVID

600

700

800

900

1000

1100

1200

1300

Thousand TEUs per Month

Sources: Port of Long Beach, Port of Los Angeles, Georgia Ports Authority
U.S. Cotton - Production, Domestic Consumption and Exports

Record Import Volumes Caused Significant Congestion

111 Container Ships Waiting Off the Coast of California

Source: Business Insider
Trans-Pacific Schedule Reliability Through May of 2022

Vessels Arriving Late

Source: Sea-Intelligence Maritime Analysis
Empty Outbound Containers: Port of Long Beach, Port of Los Angeles, & Georgia Ports Authority

Ocean Carriers Prioritized Empty Container Sailings 

40%

45%

50%

55%

60%

65%

70%

75%

Percentage of Total Export Containers

Sources: Port of Long Beach, Port of Los Angeles, Georgia Ports Authority
U.S. Cotton - Production, Domestic Consumption and Exports

Market Risks and Implications of Supply Chain Issues

 Creates shortages of supply

 Basis levels are impacted

 Increase in costs (i.e., demurrage/detention, additional 

storage costs, late pick-up fees)

 Long lead times are needed

 Loss of sales

 Increased counterparty risks

 Geopolitical disruptions further exacerbate supply chain 

problems

o Black Sea

o Trade Disputes

o Tariffs

o Labor Disruptions

o Pandemics (i.e. COVID-19)
Quarterly Earnings for the Ocean Carrier Industry (Before Interest and Taxes)

Ocean Carrier Profitability Soared During this Period

$0

$10

$20

$30

$40

$50

$60

$70

$80

'13-'19 Avg '20 Q1 '20 Q2 '20 Q3 '20 Q4 '21 Q1 '21 Q2 '21 Q3 '21 Q4

EBIT - Billions of U.S. Dollars

Source: Drewry Container Forecaster
© 2022 Cargill, Incorporated. All rights reserved. CONFIDENTIAL. This document contains trade secret information. Disclosure, use or reproduction outside Cargill or inside Cargill, to or by those employees who do not 

have a need to know is prohibited except as authorized by Cargill in writing.

© 2022 Cargill, Incorporated. All rights reserved.

Commodities Futures Trading Commission

Global Markets Advisory Committee

Panel II: Global Markets Volatility

Market Fundamentals and end users

Perspectives on key issues from producers and merchants

2/13/2023 Thane Thomas Twiggs

www.cargill.com
77 © 2022 Cargill, Incorporated. All rights reserved.

How the Global Commodities Markets Impact the End User? 

Whether you are a commercial end user, a farmer or part of the global supply chain, your 

success is subject to the global commodity markets based on the nature of your business.

With COVID, the past years identified some global supply chain disruptions, relatively good 

demand for feed and food commodities, bio industrial fuels growth, and volatility; now what? 

• Macroeconomic 

• Currency impacts to market volatility

• Central Banks’ monetary policy

• COVID: Production and the supply chain

• Geopolitical

• Regional conflicts between countries that are high exporters of commodities 

• National policies on isolationism or internationalism

• Environmental

• Drought in heavily exporting regions may change the flow of commodities

• Impact of commodities used for food and fuel
Global Markets Advisory Committee

Stuart Williams, COO, ICE
Global Markets Advisory Committee

John Murphy, Global Head of Futures Division, Mizuho 

Americas (for Commodity Markets Council)
Global Commodity Markets 

Volatility

Global Markets Advisory Committee (GMAC)

US Commodity Futures Trading Commission 

February 13, 2023

Jacqueline Mesa, Chief Operating Officer and 

Senior Vice President, Global Policy
81

LME: Oliver Wyman Independent Review

• March 3, large price increases across all metals and increases in

margin calls

• In Nickel:

• large exposed short positions,

• more buying to hedge risk,

• further pushing prices up and increasing margin

• Between March 4-8, nearly 16bn in margin calls met by

members

• Price of Nickel increased 270% over 3 days

• Due to threat of numerous defaults, LME suspended trading

on March 8 for a week and canceled 3.9 billion in trades
82

Impact of Nickel Crisis

0

200K

400K

600K

800K

 1.0M

 1.2M

 1.4M

 1.6M

 1.8M

January

February

March

April

May

June

July

August

September

October

November

December

January

February

March

April

May

June

July

August

September

October

November

December

2021 2022

Volume (lots traded)

LME Nickel Futures Volume

Primary Nickel Futures, LME

0

50K

100K

150K

200K

250K

300K

January

February

March

April

May

June

July

August

September

October

November

December

January

February

March

April

May

June

July

August

September

October

November

December

2021 2022

Open Interest (lots outstanding)

LME Nickel Futures Open Interest

Primary Nickel Futures, LME
83

LME: Oliver Wyman Independent Review

• Report did not look at governance and decision making

• Report identified recommendations, including:

• Monitoring and addressing risks in the OTC market

• Setting position/accountability limits that are tailored to the

market/product

• Putting in place volatility controls to slow down extreme price

movements (circuit breakers)

• Rehearsing default management, such as orderly closing out

positions

• Providing a clear vision for how LME will respond to events

and rebuild liquidity
84

IOSCO Principles For Regulation and Supervision of 

Commodity Derivatives Markets 

Price Limits and Trading Halts Price limits, which set boundaries for daily 

price moves, price-quality bands, trading halts and circuit breakers have been 

used by markets to address market volatility. Market Authorities may adopt 

price limits, trading halts and circuit breakers to: 

1) reduce or constrain price movements in a trading day that are perceived by 

the relevant Market Authorities as not being reflective of true market; 

conditions, but might be caused by traders overreacting to new information; 

2) provide a cooling off period for futures market participants to respond to 

bona fide changes in market supply and demand fundamentals that would 

lead to large cash and commodity derivatives contracts price changes;

3) allow additional time for the collection of margins in times of large price 

movements; 

4) prevent excessive collateral damage to other market participants who base 

their trading on market levels created through error; and 

5) enable the relevant Market Authorities to develop appropriate responses in 

the circumstances.
Market Best Practices

US Price Control Mechanisms 

CFTC Global Markets Advisory Committee 

February 13, 2023
86

Recent Commodity Market Volatility 

Source: Bloomberg LP. Note: Normalized as of 1/1/18. 

Pandemic Market Stress: 

Prices Turn Negative in Crude Oil

Ukraine/Russia Crisis: 

Supply Chain Disruption & Sanctions
87

Price Controls in Action

Source: Bloomberg LP
88

Standard US Price Controls

Regulate price moves relative to previous settlement price or a rolling lookback
89

Short-Term Price Controls

Regulate price moves over extremely brief time periods
90

Properly Functioning Markets Must Maintain 

Continuous Exchange of Risk

Source: Bloomberg LP. 

Wheat Options Implied “Synthetic” Price of $1,330 on 3/3/22 
Global Markets Advisory Committee

MEMBER DISCUSSION AND SUBCOMMITTEE VOTE
Global Markets Advisory Committee

BREAK
Global Markets Advisory Committee

PANEL III: DIGITAL ASSET MARKETS
2.13.2023

State of the Crypto Markets

Update to the CFTC Global Markets Advisory Committee
Agenda

Trends

• Risk management

• Stablecoins

• Evolving liquidity landscape

Spot Trading

• U.S. exchanges

• Non-U.S. exchanges

• OTC

• U.S. exchanges

• Non-U.S. exchanges

Futures

Options

Decentralized Exchanges
Where is the 

market 

focused?

• Separation of responsibilities vs. vertically 

integrated exchanges

• Adoption of TradFi best practices, e.g., ISDAs

• Exchange-based trading vs. bilateral trading 

without prefunding

Risk management

• Dramatic lending market changes

• Repricing of VC opportunities 

• Liquidity concentration

Evolving liquidity landscape

• Adoption for exchange trading and value transfer

• New issuance driven by rising interest rates

• Legislative and regulatory initiatives (U.S., 

Singapore, et al.)

Stablecoins

OTC Trading

Observation: Shift toward a 

more flexible structure similar to 

FX markets, where participants 

right-size operational risk by 

choosing different providers for 

their different needs.

• OTC liquidity providers 

• Aggregators

• Custody providers

• Non-custodial wallet 

providers

Custody 

Providers

Liquidity 

Aggregators

Liquidity 

Providers

Wallet 

Providers
CUMBERLAND OVERVIEW
CUMBERLAND OVERVIEW
Decentralized Exchanges

Breakdown of Spot Exchange Volume Market 

Share by Leading Decentralized Exchanges

Source: The Block; The Graph; CoinGecko | Updated 2/1/2023

• DEX (Decentralized Exchange): P2P 

marketplace with no central intermediary 

where transactions are consummated via 

smart contracts

• DEX volumes accounted for 15–20% of 

total spot volumes at peak in 2021; now 

~6% post-FTX 

• While the market is highly competitive 

and fragmented, Uniswap remains the 

largest player by market share

• Some DEXes experiment with yields 

(token rewards) to attract new users to 

their platform

• Uniqueness of the innovations and 

KYC/AML limitations have prevented 

material institutional participation, but we 

believe this is changing

0%

20%

40%

60%

80%

100%

Feb-20Apr-20Jun-20Aug-20Oct-20Dec-20Feb-21Apr-21Jun-21Aug-21Oct-21Dec-21Feb-22Apr-22Jun-22Aug-22Oct-22Dec-22

Uniswap Curve Balancer

PancakeSwap Dodo 16 Others
Global Financial Markets Association 

CFTC GMAC Meeting 13 February 2023
Key Global Regulatory Themes

FSB IOSCO BIS Innovation Hub BCBS CPMI G20

FSB announced main prioritiesfor

2023 at December 2022 Plenary 

Meeting. The announcement 

included the following effortsrelating 

to digitalization and operational 

resilience:

FSB plans to focus on “advancing 

work on the global regulatory and 

supervisory framework for cryptoasset markets and activities.” Details 

on the FSB’s Proposed Framework for 

International Regulation of Cryptoasset Activities are available here.

FSB will work towards “enhancing 

cross-border payments.” The FSB’s

final report on “Developing the 

Implementation Approach for the 

Cross-Border Payments Targets” was 

published in November 2022.

FSB will focus on “strengthening 

cyber and operational resilience.” 

Details on the FSB’s workstream on 

“Achieving Greater Convergence in 

Cyber Incident Reporting” are 

available here.

In July 2022, IOSCO

published a CryptoAsset Roadmap for

2022-2023. The

roadmap includes 

two initial 

workstreams on:

1)Crypto & Digital 

Assets(CDA)

2)Decentralised 

Finance (DeFi)

In July 2022, IOSCO

published a final 

report on 

“Operational 

resilience of 

trading venues 

and market 

intermediaries 

during the COVID19 pandemic &

lessons for future 

disruptions.”

The BIS Innovation

Hub (BIS IH) work 

programme for 2023

focuses on the 

following themes:

Suptech and

Regtech

Next-generation

FMIs

Central Bank Digital

Currency (CBDC)

Open finance

Cyber security

Green finance

The BCBS published its work

programme and strategic priorities

for 2023-2024.

Digitalisation of finance was 

included as a key theme in the 

programme with expected efforts 

to:

“publish an analytical report on 

the bank and supervisory 

implications of the ongoing 

digitalisation of finance”;

“continue to assess bank-related 

developments in cryptoasset 

markets”;

“monitor the implementation of 

its prudential treatment of banks' 

cryptoasset exposures”

Monitoring and review of existing 

standards and guidance was 

included as a key theme with 

expected work on “developing 

updated supervisory principles on 

banks' outsourcing practices and 

reliance on third- and fourthparty service providers, building 

on work underway by the FSB”

Key CPMI building

blocks as part of 

the Cross-border

payments

programme

include:

Building Block 18: 

Fostering the 

soundness of 

globalstablecoin 

arrangementsfor 

cross-border 

payments

Building Block 19: 

Factoring an 

international 

dimension into 

CBDC design

The Indian G20

Presidency’s

Finance Track

established a Global 

Partnership for 

Financial Inclusion 

(GPFI) that includes 

work areas on 

“digital financial 

literacy and 

bridging the digital 

divide among 

others.”

The Finance Track 

also includes 

“strengthening 

global financial 

system resilience”, 

“enhancing crossborder payments” 

and “assessment of 

risksfrom cryptoassets and policy 

approaches” as key 

financialsector 

issues to be 

discussed directly at 

the level of the G20 

Finance and Central 

Bank Deputies.

2

The below table highlights the latest priorities and workstreams announced by the Global Standard Setter setters on 

the topics of digitalization and operational resilience*.
A. Value-Stable Digital-Assets

1. Central Bank Digital Currencies (CBDC) (e.g., e-Krona): Digital form of money that represents a liability of a

central bank in a single fiat sovereign currency that may or may not pay interest

2. Financial Market Infrastructure (FMI) Tokens (e.g., USC): Digital form of money representing claims on an FMI

and reflecting deposits held at a central or commercial bank in a single fiat currency that may or may not pay

interest

3. Tokenised Commercial Bank Money (e.g., Signet): A token evidencing a deposit claim for a fixed amount of fiat

money denominated in a single currency by the token-holder against the token issuing bank or other similarly

highly regulated depository institution. It may or may not pay interest.

4. Stablecoins: Tokens designed to minimise/eliminate price fluctuations relative or in reference to other asset(s)

which are not issued by a central bank, FMI, bank, credit institution or highly-regulated depository institution. May represent a claim on the issuing entity, if any, and/or the underlying assets

a. Asset Linked Digital-Asset – value may be fixed or variable and in reference to individual structures or

include a combination of:

• Fiat currency linked (e.g., Tether, Paxos, USDC, Gemini)

• Other real asset linked (e.g., Sendgold, Xaurum)

• Digital asset linked (e.g., Maker)

b. Algorithmic Digital-Asset: Typically, not linked to any underlying assets and each token can be pegged to a

price level or a unit maintained through buying, selling or exchange among assets or some other pre- determined mechanism

Types of Digital Assets

December 2022, GFMA published a proposed approach for the classification and understanding of digital-assets as an 

annex to its response to the FSB on the “International Regulation of Crypto-Asset Activities – A Proposed Framework.”
B. SecurityToken

• Token issued solely on DLT or blockchain infrastructure that satisfies the applicable regulatory definition of a

security

i. or financial instrument under local law (e.g., World Bank’s‘Blockchain Bond’)

• Token that represents on DLT or blockchain infrastructure underlying securities/financial instruments issued

on a different platform (e.g., a traditional CSD, registrar, etc.), where such representation itself satisfies the

definition of a security/financial instrument under local law.

C. Cryptocurrencies

• Digital representations of value with no redemption rights against a central party and may function within

the community (enabled through peer-to-peer networks) of its users as a medium of exchange, unit of

account or store of value, without having legal tender status. They may also act as an incentive mechanism

and/or facilitate functions performed on the network they are created in; their value is driven by market

supply/demand therein.

D. Settlement Token

• Representation on DLT or blockchain infrastructure of underlying traditional securities/financial instruments

issued on a different platform (e.g., a traditional CSD, registrar, etc.) where such representation itself does

not satisfy the definition of a security or financial instrument under local law and is used solely to transfer or

record ownership or perform other mid/back-office functions (e.g., collateral transfer, recording of

ownership)

Types of Digital Assets, cont.
E. Utility Token

• A means of accessing a DLT or blockchain platform and/or a medium of exchange which participants on that

platform may use for the provision of goods and services provided on that platform (e.g. loyalty rewards

programs/systems, gift card rewards, credit points that are only usable within the DLT or blockchain

platform, memory and network server space, and other utilities- based value); or

• Tokens that are not native to the underlying network but are used for accessing applications that are built

on top of another DLT or blockchain infrastructure platform (dApp)

F. Other Crypto-Assets (not structured as value-stable crypto-assets)

• Representation on DLT or blockchain infrastructure of ownership in tangible or intangible underlying assets

or of certain rights in those assets (such as interest, e.g., loans), which are not securities or financial

instruments (e.g., real estate, art, intellectual property rights, precious metals, grains, or non-fungible assets

that only exist in digital form on a DLT network); they may represent a claim on the issuing entity or the

underlying assets.

Types of Digital Assets, cont.
107

February 13, 2023

Information Classification: PUBLIC

PERSPECTIVES ON 

DIGITAL ASSETS

Global Markets Advisory Committee, 

U.S. Commodity Futures Trading Commission

Panel I: Digital Asset Markets, Part II
108

*BNY Mellon commissioned Celent to survey over 270 institutional investors (asset managers, asset owners, and hedge funds) around the globe. Research originally published October 2022. Celent is a member of the Oliver Wyman group, a 

global research & advisory firm. Celent developed this research; and the analysis, conclusions, and opinions are Celent’s alone.

Institutional investors know that 

digital assets are here to stay and 

are actively exploring the space

Appealing value proposition for 

digital cash use cases among 

institutional investors

Tokenization will revolutionize 

asset management and has 

strong support among investors

76%

93%

are currently investing in or 

exploring various types of 

digital assets

see value in extending 

payment windows to move 

cash and securities 

24/7/365

41%

97%

hold cryptocurrency in their 

portfolios today, with an 

additional 15% planning to 

within the next 2-5 years

agree that “tokenization will 

revolutionize asset 

management”

Accelerating institutional 

adoption of Digital Assets

Digital Cash

Tokenization 91%

are interested in investing 

in tokenized products

88%

are comfortable with digital 

representation of cash using 

blockchain based technology

A Defining Moment for Digital Assets

2022 Institutional Research* on Digital Assets – Key Themes & Trends

70%

are willing to pay extra for 

increased liquidity and 

faster asset turnover

69%

would only engage in 

24/7/365 payment and 

settlement mechanisms 

with highly rated institutions

88%

are planning to move 

forward with adoption of 

digital assets, even in the 

midst of a crypto winter
109

Taxonomy Is Important – What Are “Digital Assets”?

While there is no single, widely-accepted definition of “digital assets,” it can generally be viewed through three lenses:

• Virtual currencies not backed 

by assets

• Depends primarily on 

cryptography and distributed 

ledger or similar technology

CRYPTOCURRENCIES

• Deposit Tokens: Represent 

traditional cash deposits on chain 

for intrabank transfer purposes

• Stablecoins: Privately issued; aim 

to maintain value relative to a 

specified asset or pool of assets 

and satisfy criteria related to 

redeemability and reserves

• Central Bank Digital Currencies 

(CBDCs): Publicly issued by 

central banks; complement existing 

forms of fiat in two forms: retail 

(households and businesses) and 

wholesale (financial institutions)

• Digital representations of traditional 

assets using cryptography, 

distributed ledger, or similar 

technology

• Potential for native issuance on a 

distributed ledger

DIGITAL CASH TOKENIZED ASSETS
110

Increasing Interest in Tokenized Assets

Motivations vary – expanding access to investors, increasing liquidity, enhancing transparency etc.

*BNY Mellon commissioned Celent to survey over 270 institutional investors (asset managers, asset owners, and hedge funds) around the globe. Research originally published October 2022. Celent is a member of the Oliver Wyman group, a 

global research & advisory firm. Celent developed this research; and the analysis, conclusions, and opinions are Celent’s alone.
111

Embracing Innovation While Maintaining Trust

Essential to promote responsible innovation with clear regulation and guardrails

Maintaining the US financial services sector’s 

competitiveness in the global market

Achieving regulatory clarity is essential to maintaining the competitive 

edge of the US financial services sector and enabling it to take 

advantage of the transformative power of the underlying technology

Developing regulatory frameworks that promote 

innovation

Developing a regulatory framework that enables the financial industry 

to prudently embrace the innovation behind DLT within appropriate 

regulatory guardrails 

Being mindful of unintended consequences

New frameworks and regulations must carefully consider 

interdependencies and avoid unintended consequences

STRATEGIC THEMES ISSUES TO TACKLE

Developing a taxonomy that distinguishes 

cryptocurrencies / crypto assets from traditional 

financial instruments. This is critical because 

risk profiles differ based upon, among other 

things, public/permissionless networks and 

private/permissioned networks.

Building on existing frameworks rather than 

starting from scratch by identifying and 

incorporating net new factors and risks (e.g., 

technology risks) in existing regulatory 

frameworks, rather than introducing completely 

new ones

Ensuring technology neutrality for the 

distributed ledger technology (DLT). Activities of 

established asset classes and tokenized 

representations of them should not be treated 

differently due to the use of DLT
112

Corporate Disclaimer

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may be used to reference the corporation as a whole 

and/or its various subsidiaries generally. This material does not constitute a recommendation by BNY Mellon of any kind. The information 

herein is not intended to provide tax, legal, investment, accounting, financial or other professional advice on any matter, and should not be 

used or relied upon as such. The views expressed within this material are those of the contributors and not necessarily those of BNY 

Mellon. BNY Mellon has not independently verified the information contained in this material and makes no representation as to the 

accuracy, completeness, timeliness, merchantability or fitness for a specific purpose of the information provided in this material. BNY 

Mellon assumes no direct or consequential liability for any errors in or reliance upon this material.

This material may not be reproduced or disseminated in any form without the express prior written permission of BNY Mellon. BNY Mellon 

will not be responsible for updating any information contained within this material and opinions and information contained herein are subject 

to change without notice. Trademarks, service marks, logos and other intellectual property marks belong to their respective owners.

©2023 The Bank of New York Mellon
Stellar Aid Assist

Stellar Aid Assist

113

Global Markets Advisory Committee, U.S. Commodity Futures Trading Commission.

Panel I: Digital Asset Markets. Use Cases: Digital Finance and Tokenization.

February 13, 2023
Stellar Aid Assist

Stellar Aid Assist is a first-of-its-kind aid disbursement system powered by the Stellar blockchain 

network — supported by Circle’s USDC, Vibrant wallet, and MoneyGram International — that enables 

the delivery of urgently-needed cash assistance to vulnerable and displaced populations quickly and 

transparently. 

114

What is Stellar Aid Assist?

Digital dollars issued by 

Circle on Stellar network

Digital dollars distributed 

to approved recipients 

on Stellar

Aid recipients receive 

funds instantly in digital wallets

Withdraw cash at any MoneyGram 

location when needed or send to 

bank account
115 Stellar Aid Assist

Enables the delivery of cash assistance 

to vulnerable populations quickly 

through the Stellar blockchain.

Allows individuals to receive digital 

dollars and either hold the value in a 

more stable store or 

exchange it for a local currency.

Provides greater efficiency, flexibility 

and transparency to traditional cashbased interventions for organizations.

Why Stellar Aid Assist?
116 Stellar Aid Assist

How Does Stellar Aid Assist Work?

Individuals and 

families register 

with aid org

Eligible program 

recipients are sent 

an SMS link to 

obtain funds

Recipient is 

prompted to 

download a digital 

wallet 

Recipient 

establishes account 

and collects USDC

Recipients initiate a 

physical cash out 

(or digital where 

available) through 

MoneyGram

Recipients have 

local currency or 

possibly reserve 

currencies to spend

The wallet verifies phone numbers with the aid organization to confirm program eligibility. 

The aid organization then authorizes the distribution of funds to eligible wallets.
117 Stellar Aid Assist

Benefits for Cash Assistance Programs 

Benefits

• Transparency: End-to-end traceability of funds help mitigate abuse 

• Instant (bulk) Disbursement: Deliver aid instantly using the world’s fastest-growing USD stablecoin

• Accessibility: Recipients don’t need a bank account to receive aid

• Stability: Digital dollars sent via Stellar provide a more stable store of value to recipients

• Portability: Recipients are able to more safely transport and access funds 

• Global Cash Out: The Stellar network’s expansive geographic and physical reach supports cash out locations 

globally (~180 countries/territories) in multiple currencies.
118 Stellar Aid Assist

Benefits to Donors and Recipients

Benefits to aid donors Benefits to recipients

• Realize benefits of the public blockchain (i.e. fast, 

transparent, low cost)

• Can be extended easily to support other countries 

and use cases (e.g. local payroll)

• Low-cost solution that can be implemented quickly

• Potential to reduce program fraud and facilitate 

better auditing

• Allows for future innovation, including end-to-end 

tracking of donor funds

• Supports the unbanked population

• For banked populations, digital cash out may be 

possible from the safety of home

• Simple-to-use wallet with fast funds availability

• Use of a global reserve currency to protect against 

potential inflation and local currency devaluation

• Funds can be cashed out in local currency 
119 Stellar Aid Assist

Built by the Stellar Development Foundation and Partners

Stellar Development Foundation is a nonprofit organization whose mission is to create 

equitable access to the global financial system

Circle is a global financial services company that issues and manages the USD Coin 

(USDC), a fully backed U.S. dollar stablecoin

Moneygram International is a global money service provider that operates in more than 

180 countries and territories with a global network of 380,000 agent locations

Vibrant is a US-based digital wallet software provider that supports USDC operated by 

Sunship Inc, a subsidiary of SDF
Global Markets Advisory Committee

Commodities and Futures Trading Commission

“Non-Financial Activities and Web 3”

February 13, 2023
The history of the internet and rise of the creator economy

1990 2008

2000

Web 1:

Basic HTML, Email

Fragmented; 

Decentralized

“Hunters and gatherers”

Web 2:

Rise of centralization

Social media

Oligopolistic control of user 

data

Data and information centric

“Monarchy/Oligopoly”

Web 3:

Blockchain enabled decentralization

Trustless; permissionless; peer to peer 

Token incentives and governance

Private property in the internet!

“Democracy”
Non-Fungible Tokens (NFTs):

● Infinite use cases around title and internet 

ownership. 

● Most successful consumer product since the 

smartphone; ~$50bn trading volume in last 2 

years

● Profile Pictures; art, music, video, collectables

● Real World Assets 

Creators and players can actually own assets in web3 

Web3 Gaming:

● Play to Earn (P2E) gaming

● Earned, in game assets can be financialized to 

enable new studio and player business models

● User experience is improving quickly

● Today, gaming industry is $200bn and growing

● Web3 is poised to unlock next generation of 

gaming and users
Decentralized Autonomous Organizations (DAOs)

● Token-enabled governance and communities 

not controlled by central authority

● Treasury raised and deployed based on 

community values and ideals

● Democratic voting principles

Web3 enables token governance and user data sovereignty

Web3 User Data Sovereignty

● Users are compensated for the data the 

deliver

● Decentralized Social Media

● The individual is no longer the product; they 

are the beneficiary
Artificial Intelligence

● In web2, key data sets are closed source.

● Web3 infrastructure for AI could introduce 

open source development, community 

ownership and governance, and universal 

access that create new models and 

efficiencies in developing these new 

technologies.

Open source Web3 provides a foundational layer for new applications

The Environment

● The immutability of blockchain technology 

unlocks new ways to identify carbon credits--

eliminating the “double spend” problem

● Widespread transition to Proof of Stake 

consensus mechanisms has also made web3 

more environmentally friendly.
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Uniswap Labs

Digital Asset Markets: 

Blockchain Technology

Global Markets Advisory Committee, 

U.S. Commodity Futures Trading Commission

February 13, 2023
Uniswap Labs

Why is blockchain good?

Blockchains combine data storage –

such as messaging and recordkeeping –

and money movement

● This can lower costs by removing friction and 

operational overhead –

and allows for nearly instant settlement

● In Ethereum and other blockchains that support 

smart contracts, multiple asset types operate 

on the same tech and operational 

infrastructure in a standardized digital format

Source: The cost estimates for banks and money transfer operators are from the World Bank Remittance Prices Worldwide database 

(KNOMAD). DeFi estimates are Uniswap Labs’ staff calculations and can be found here, here, and described here. 
Uniswap Labs

Blockchains can 

be open or 

closed

Open systems allow for interoperability, improved security and 

transparency

● Interoperability: Market activities — lending, swapping —

can be developed as modules. These can integrate with 

each other without requiring bilateral agreements

● Security: Publicly-released code allows for rapid 

identification of vulnerabilities

● Transparency: Anyone can trust and verify transactions 

and that the system is running as expected in real time
Uniswap Labs

Central banks are experimenting with Automated Market Makers 

because of their structural advantages

Examples: MAS’ Project Guardian, BIS’ Project Mariana

>50% deeper liquidity on Uniswap 

Protocol vs. centralized exchanges

Consistent liquidity across time 

and day

Democratizes liquidity provision by 

allowing 100k+ participants
Uniswap Labs

Analogue: 

Railroad standardization

>20 different gauges of railroad tracks were used in the 

19th century U.S., leading to accidents, service disruptions, 

etc.

Gauge was standardized by Pres. Abraham Lincoln during 

the creation of the Transatlantic Railroad

Standardized tracks allowed any railroad line to build 

businesses on top of them

Interoperability and standardization allow for competition 

and innovation
Uniswap Labs

What might drive 

progress?

Distinguish beneficial blockchain applications 

from hacks, scams and bad behavior

● Encourage public-private sector collaboration on DeFi

○ e.g., Monetary Authority of Singapore and Bank of Int’l 

Settlements’ projects

● Highlight future financial and non-financial applications, e.g., 

patient records, tracking goods

○ California DMV plans to use blockchain technology to 

verify car titles and registrations

○ 94% of surveyed Fortune 500 executives have blockchain 

project plans
Uniswap Labs

Thank you!
Global Markets Advisory Committee

MEMBER DISCUSSION AND SUBCOMMITTEE VOTE
Global Markets Advisory Committee

CLOSING REMARKS