Wednesday saw the start of the annual meeting for International Swaps and Derivatives Association. The event featured two keynote speakers: Gary Gensler, chairman of the United States Securities and Exchange Commission (SEC), and Rostin Behnam, chairman of the U.S. Commodity Futures Trading Commission, (CFTC), at the morning session and Gensler at the afternoon.
Behnam talked long about “a request to an amended order for registration as a derivatives clear organization (DCO), by an entity seeking non-intermediated clearance of margined product to retail participants,” which was clearly a reference to FTX US.
“As other registered entities expressed interest in exploring similar model, and considering the potential impact on clearing members, FCMs [futures Commission merchants]”, […] it was paramount to be transparent, and provide an opportunity for the public to hear from them,” Behnam stated, plugging the CFTC roundtable about the subject, which will take place later in the month.
Sam Bankman Fried, CEO of FTX, may have been listening to Behnam speak. However, Bankman Fried was there at the conference and took part in a fireside chat a few days later.
Behnam continued to recall his February Senate testimony, and said that:
“I will continue to advocate for and support legislative authority for CFTC in order to develop a regulatory structure for the cash digital asset market.”
Currently, the CFTC regulates only derivatives markets. However, it has exercised enforcement authority over cash market liquidity, such as the fine it imposed upon Coinbase in 2021 for incorrect reporting of exchange volume, and “self-trading.”
Similar story: Bipartisan bill gives CFTC authority to regulate exchanges and stablecoins
Gensler’s much shorter speech spoke of “the intersection between crypto assets and derivatives”. He stated:
“If platforms, whether they’re in the decentralized space or the centralized finance sector, offer security-based Swaps, they’re implicated by securities laws and must operate within our securities regime.”
Gensler stressed that the ISDA must recognize that the underlying asset can be considered a security and the derivative must conform to securities regulations as it develops legal standards regarding crypto derivatives.