Better Markets filed a comment letter with the Commodities Futures Trading Commission (CFTC) regarding potential regulatory amendments under the Commodity Exchange Act governing the risk management programs of swap dealers, major swap participants, and futures commission merchants (FCMs).

Why it Matters.  Effective risk management is crucial for swap dealers and FCMs as it ensures the stability and integrity of financial markets. Beyond preserving their own financial well-being, prudent risk management serves as a linchpin for bolstering overall market confidence and resilience. By preemptively identifying and mitigating potential risks, these financial entities not only contribute to the seamless operation of markets but also mitigate the risk of financial crises while safeguarding the interests of customers and market participants. Swap dealers and FCMs, as intermediaries in complex financial transactions, are uniquely positioned to influence market dynamics. By meticulously assessing, quantifying, and addressing risks, they preemptively avert scenarios that could undermine market stability.

What we said. Better Markets calls upon the CFTC’s to prioritize aligning risk management programs for swap dealers and FCMs with the evolving landscape of financial stability risk. Recent years have ushered in a new era marked by unprecedented challenges, including the rapid evolution and adoption of emerging technologies such as cryptocurrency and artificial intelligence, which introduce their own risks. Climate-related disasters have inflicted significant financial losses, emphasizing the need to integrate climate risk management. The increasing frequency of cyberattacks further complicates risk management in the digital age, while the ongoing global pandemic disrupts supply chains and economic stability. In response, Better Markets emphasizes the importance of a proactive approach to ensure that risk management frameworks remain adaptable and capable of identifying and responding to emerging and evolving risks. This vigilance is essential to safeguarding the integrity and resilience of financial markets and protecting the interests of market participants and the public.

Bottom Line.  Better Markets supports the CFTC’s efforts in obtaining information from the public in assessing the elements needed in future rulemaking.

You can find the comment letter here.